Marine Insurance

History, Development, Principles and Law

History
Marine Insurance started by the end of 12th
century in North Italy. When merchants
came to England they brought with the
practice of Insurance.
Since then it passed through various
developments and the marine insurance in
present form was the creation of Lloyds
Association in 1774 in London.
All aspects of shipping business were
discussed
Provided unique facilities for them by
supplying a daily newspaper called Lloyds
News(1734)

Contd.

Giving up-to-date news of everyday ship

movements, causalities and frights.
It is common saying that anything can be
insured at Lloyds.
Ex. Lloyds paid $1million dollars claims on
the sinking of the Titanic ship in 1912.
$300 million for the damage by bombing of
the WTC in new york city etc
The corporation of Lloyds was incorporated
by the Act of the parliament in 1871
Even today it is the leading one in the
whole of the world

Law-developments
It was modified from time to time and then
each country passed its own law regulating
the marine insurance.
The marine insurance Act, 1906 was
passed in England and the Indian marine
insurance business was conducted
according to the provisions of the Act.
Objects and reasons of 1906 Act: Indian Navy and shipping have undergone
considerable
expansion
since
Independence. As there was no Indian
legislation to govern, it continued to be
governed by this Act.

Contd.,

Insurance contracts in India also

became the subject of the Indian
contract Act
The insurance policy forms used in
India were the english forms based
on
mercantile
customs
and
conventions.
It was appeared to be in conflict with
the provisions of Indian contract act,
which
resulted
in
different
interpretations by the courts.

Subject of Marine Insurance

Five types:
(1) property designated for export
(2) imported property in the process of
shipment
(3) Domestic property in the process of
shipment
(4) property used to facilitates
transportation, such as bridges, tunnels,
pipelines, and electrical transmission towers
(5) personal property that is easily moved
and typically of significant value such as
jewellary, furs, and cameras etc.

Kinds of policies
Transit Insurance:
The finished goods when shipped from the
manufacturer to a whole seller or directly to a
departmental store(annual transit policy)
Instruments of transportation cover bridges,
tunnels, pipelines, dams, and traffic signals
Hull insurance:
The hull means the body or frame of the ship
or vessel and its machinery. Thus this type of
insurance covers ship and its equipment's.
The ships or vessels may be classified as sea
going vessels, sailing vessels etc.

Contd.
The hull policies may also cover the risk
while the vessel is under construction.
Cargo Insurance: It means the goods carried on a ship. Cargo
insurance is taken in respect of the cargo
carried by the ship from one place to
another (voyage-course of travel by water or
sea)
It may be a time policy
If it is for a particular voyage, known as
voyage policy and there is no time limit
There may be mixed time and voyage
policies

Contd.
Freight Insurance: The freight is the rent or amount paid for the
transportation of cargo.
Generally the ship owner and the person
receiving the freight is one person. The freight
could be paid in advance or at the destination.
U/s.14 of the M.I act if the freight has been
paid in advance it cannot be recovered in
case the cargo is lost during the voyage.
Floating policy:
where the maximum amount of protection is
estimated for which the premium is payable in
advance which is adjustable at the end to the
policy.

Contd.

Fleet policy:- which covers a number

of vessels under a single policy
Other policies: Sec-27:Time policy
Sec-27: voyage policy
Sec-29: Mixed time and voyage
policy
Sec-29: Valued policies
Sec-30: Unvalued policies
Sec-31: Floating policy

Voyage and time policies:-

(1) Where the contract is to insure the

subject-matter at and from, or from one
place to another or others, the policy is
called a "voyage policy", and where the
contract is to insure the subject -matter for a
definite period of time, the policy is called a
"time policy" A contract for both voyage and
time may be included in the same policy.
(2) A time policy which is made for any time
exceeding twelve months is invalid.

Valued policy:-

(1) A policy may be either valued or unvalued.

(2) A valued policy is a policy which specifies
the agreed value of the subject-matter insured.
(3) Subject to the provisions of this Act, and in
the absence of fraud, the value fixed by the
policy is, as between the insurer and assured,
conclusive of the insurable value of the subject
intended to be insured, whether the loss be
total or partial.
(4) Unless the policy otherwise provides, the
value fixed by the policy is not conclusive for
the purpose of determining whether there has
been a constructive total loss.

Cond.

Unvalued policy: An unvalued policy is a policy which does not specify

the value of the subject-matter insured, but subject
to the limit of the sum insured, leaves the insurable
value to be subsequently ascertained, in the manner
hereinbefore explained.(insurable value)
Floating policy by ship or ships
(1) A floating policy is a policy which describes the
insurance in general terms, and leaves the name or
names of the ship or ships and other particulars to be
defined by subsequent declaration.
(2) The subsequent declaration or declarations may
be made by endorsement on the policy, or in other
customary manner.

Cond.

(3) Unless the policy otherwise provides, the

declarations must be made in the order of dispatch
or shipment. They must, in the case of goods,
comprise all consignments within the terms of the
policy and the value of the goods or other property
must be honestly stated, but an omission or
erroneous declaration may be rectified even after
loss or arrival, provided the omission or declaration
was made in good faith.
(4) Unless the policy otherwise provides, where a
declaration of value is not made until after notice
of loss or arrival, the policy must be treated as an
unvalued policy as regards the subject-matter of
that
declaration

Marine Insurance Act, 1963

It consists of 93 sections which includes
definition, Insurable Interest, Insurable value,
disclosure and representation, the policy,
double
insurance,
warranties,
voyage,
assignment of policy, the premium, lost and
abandonment, measure of indemnity, rights of
insurer and at the end rules for the
construction of the policy
Sec-3: definition of Marine Insurance:
A marine insurance is an agreement where
by the insurer undertakes to indemnify
assured in the manner and to the extent there
by agreed, against marine losses, that is to say
the losses incidental to marine adventure

Contd.

(13A) of Insurance Act 1938: marine insurance

business" means the business of effecting
contracts of insurance upon vessels of any
description, including cargoes, freights and
other interests which may be legally insured, in
or in relation to such vessels, cargoes and
freights, goods, wares, merchandise and
property of whatever description insured for
any transit,
by land or water, or both, and whether or not
including warehouse risks or similar risks in
addition or as incidental to such transit, and
includes any other risks customarily included
among the risks insured against in marine
insurance policies;

Contd.
Definitions. 2. Definitions. In this Act, unless
the context otherwise requires,- (a)"contract of marine insurance" means
a contract of marine insurance as defined by
section 3;
(b) "freight" includes the profit derivable by
a ship-owner from the employment of his ship
to carry his own goods or other movables, as
well as freight payable by a third party, but
does not include passage money;
(c) "insurable property "means any ship,
goods or other movables which are exposed
to maritime perils;

Contd.
(d)"marine adventure" includes any adventure
where
(i) any insurable property is exposed to maritime
perils;
(ii) the earnings or acquisition of any freight,
passage money, commission, profit or other
pecuniary benefit, or the security for any advances,
loans, or disbursements is endangered by the
exposure of insurable property to maritime perils
(iii) any liability to a third party may be incurred by
the owner of, or other person interested in or
responsible for, insurable property by reason of
maritime perils;

Contd.

(e)Maritime perils" means the perils consequent

on, or incidental to, the navigation of the sea, that
is to say, perils of the seas, fire, war perils, pirates,
rovers, thieves, captures, seizures, restraints and
detainments of princes and peoples, jettisons,
barratry
and
any
other perils which are either of the like kind or may
be
designated
by
the
policy
(f) "movables" means any movable tangible
property, other than the ship, and includes
money, valuable securities and other documents;
(g) "policy" means a marine policy;
(h)"ship" includes every description of vessel used
in navigation;
(i) "suit" includes counter-claim and set-off.

Meaning of some imp terms

Jettisons: Voluntary throwing away

the cargo or any part of the vessel in
the sea in order to lighten the ship
for the safe onward Journey.
Barratry: It may be defined as a
wrongful willful act committed by the
master.
A fraud or gross negligence of a ships
master.
Ex: if the fire fraudulently set on the
ship or the cargo or theft is
committed without the knowledge of

Sec-4: Mixed sea and land risks.

.

(1)A contract of marine insurance may, by its express terms

or by usage of trade, be extended so as to protect the
assured against losses on inland waters or on any land
risk which may be incidental to any sea voyage.
(2) Where a ship in course of building, or the launch of a
ship, or any adventure analogous to a marine adventure,
is covered by a policy in the form of a marine policy, the
provisions of this Act, in so far as applicable,
shall apply thereto, but, except as by this section provided,
nothing in this Act shall alter or affect any rule of law
applicable to any contract of insurance other than a
contract of marine insurance as by this Act defined.
Explanation:
"An adventure analogous to a marine adventure" includes
an adventure where any ship, goods or other movables
are exposed to perils incidental to local or inland transit.

Contd.

5. Lawful marine adventure:

Subject to the provisions of this Act, every lawful
marine adventure maybe the subject of a contract
of marine insurance
6. Avoidance of wagering contracts:(1) Every contract of marine insurance by way of
wagering is void.
(2) A contract of marine insurance is deemed to be a
wagering contract-(a) where the assured has not an insurable interest as
defined by this Act, and the contract is entered into
with no expectation of acquiring such an interest; or.
(b) where the policy is made "interest or no interest",
or
"without further proof of interest than the policy
itself", or "without benefit of salvage to the insurer",

Sec-7:Insurable Interest
(1) Subject to the provisions of this Act, every
person has an insurable interest who is
interested in a marine adventure.
(2) In particular a person is interested in a
marine adventure where 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
thereof, or may incur liability in respect thereof.

Contd.

Insurable Interest is that:

(1) there must be a physical object which
is exposed to marine perils and
(2) the assured must have some legally
recognized relationship with the object in
consequences of that he benefits its
preservation and is prejudiced by its loss
or damage
The insurable interest may not be present
at the time of taking the insurance, but it
must be present at the time of loss of the
subject matter of the insurance.

Contd.

8. When interest must attach

(1) The assured must be interested in the subjectmatter insured at the time of the loss, though he
need not be interested when the insurance is
effected:
Provided that, where the subject- matter is
insured "lost or not lost", the assured may
recover although he may not have acquired his
interest until after the loss,
unless at the time of effecting the contract of
insurance the assured was aware of the loss, and
the insurer was not.
(2) Where the assured has no interest at the time
of the loss, he cannot acquire interest by any act
or election after he is aware of the loss.

Contd.

As a general rule, the assured must, at the time of

loss, have an insurable interest in the subject
matter insured.
In contracts of international sale of goods, it is
not always easy to ascertain at any given time
whether the property has in fact passed from
seller to buyer.
The existence of interest is a condition to
effective insurance. It is often a difficult
question to determine the exact moment when
under a contract of sale, the risk passes from
seller to buyer. Prima facie, the risk passes
when the property passes; but under the terms
of the contract they may pass at different
times.
When the buyer insures goods, the question is

lost or not lost

Thus, the law recognizes certain exceptions

to the general rule that the assured must
have an insurable interest at the time of the
loss.
First, if the policy offers cover on a lost or
not lost basis, then the assured is, according
to the proviso to Section 8(1) permitted to
recover under the policy even though the loss
was sustained before the insurance was
effected.
This exception operates to protect an assured
who might have purchased goods without
knowing whether or not they have already
been lost at sea.

Contd.

Secondly, an assignee of a policy

can acquire an interest in the subject
matter insured even though the
policy was assigned to him only after
the loss, provided of course, that the
assignor himself had, at the time of
assignment, an interest to assign.

Instances of insurable Interest

Defeasible or Contingent Interest (Sec-9):

Section 9. Defeasible or contingent interest:

(1) A defeasible interest is insurable, as also is a contingent
interest.
(2) In particular, where the buyer of goods has insured
them, he has an insurable interest, notwithstanding that he
might, at his election, have rejected the goods, or have
treated them as at the sellers risk, by reason of the latters
delay in making delivery or otherwise.
Contingent interest is one which depends on chance.
Defeasible interest is that which is capable of being or
liable to being, annulled or undone
According to this section a deafesible or contingent interest
is insurable
In particular where the buyer of goods has insured them he
has an insurable interest (He can insured liability for
salvage expenses, liability for carriage of passengers, the
liability of Jettison losses)

C&F (Cost and Freight)

In almost all export transactions

where credit is allowed by the seller
to the buyer and the goods are not
exported on a C&F (Cost and Freight)
basis,
the responsibility for the goods
passes to the buyer when the goods
are loaded on to the overseas vessel
but the ownership does not change
until the buyer accepts the goods
and relative documents.

FOB (Free on Board)

FOB (Free on Board) contracts require some
further steps to be taken by the seller.
The seller here undertakes to put the goods on
board (definitely across the rail) of a ship that
has been named to him by the buyer and is
berthed at the agreed port of shipment.
All charges, including the delivery of goods on
board, have to be borne by the seller while the
buyer has to bear all the subsequent expenses
including stowage, freight, insurance, import
duties and other incidental charges.
The export licenses have to be obtained by the
seller. In this case, the proof of delivery has to
be given to the buyer or his agent.

Insurance on FOB & C and F

An exporter may often sell goods on terms

where his customer (an importer) is responsible
for insuring (or at least bearing the risk of
damage of or loss to) the goods;
for example, where the terms of payments as
per the contract of sale are on FOB or C&F
basis.
Thus, if the seller is allowing credit to the buyer
and has shipped goods on FOB or C&F terms,
where the responsibility for loss or damage to
the goods is passed to the buyer when the
goods are loaded on to the overseas vessel, the
seller has no control over the conditions of the
insurance cover arranged by the buyer.

Ex..

The Seller's Contingency Policy is in

fact a 'Backup Insurance' that protects a
party's interest if certain events occur.
For example, if the Assured buys or
sells cargo on terms under which the
insurance is arranged by the other
party, and that insurance fails to
respond to a covered loss,
the Contingency Insurance protects the
Assured's interest in the shipment.
It is an insurance against relatively
remote possibilities.

Contd.

Partial Interest:- A partial Interest of any nature

is insurable.
Any nature may include the interest in the
ship, the interest in the cargo or the interest in
its freight.
Re-insurance:
(1) The insurer under a contract of marine
insurance has an insurable interest in his risk,
and may re-insure in respect of it.
(2) Unless the policy otherwise provides, the
original assured has no right or interest in
respect of such re-insurance.

Contd.

Bottomry and Respondentia: Bottomry loan refers to the mortgage

of ship
Respondentia loan refers to the
mortgage of cargo.
the money lender on bottomry or
respondentia has a insurable interest
in respect of loan
Master and seamans wages:- the
master or any member of the crew of
the ship has an interest in respect of

Contd.

Advance freight:-In the case of advance

freight, the person advancing the freight
has an insurable interest, in so far as such
freight is not repayable in case of loss.
Freight may into one of three broad
classes: Chartered freight: it is the hire payable
to the owner of a vessel by the charterer
under a charter party.
Ordinary freight: it is the amount to be
earned by an owner or charterer in
carrying cargo belonging to anther.
Trading freight: it is the sum nationally
earned by an owner or charterer in the

Contd.

In case of advance of freight the person

advancing the freight has an insurable
interest in so far as such the freight is not
repayable in case of loss
Thus the owner of the ship can insure the
risk of freight in case he fails to earn the
same due to the accident of the ship
And if the freight has been paid in
advance the person who pays such freight
can get the insurance regarding the
freight by virtue of this insurable interest
in freight provided the freight is not
repayable in case of loss

Quantum of Interest

(1) Where the subject-matter insured is mortgaged,

the mortgagor has an insurable interest in the full
value thereof, and the mortgagee has an insurable
interest in respect of any sum due or to become
due under the mortgage.
(2) A mortgagee, consignee, or other person having
an interest in the subject-matter insured may insure
on behalf and for the benefit of other persons
interested as well as for his own benefit.
(3) The owner of insurable property has an
insurable interest in respect of the full value
thereof, notwithstanding that some third person
may have agreed, or be liable to indemnify him in
case of loss.

Assignment of Interest
A Marine Policy, unlike other non marine policy
is assignable unless it is restricted.
Where the assured assigns or otherwise parts
with his interest in the subject-matter insured,
he does not thereby transfer to the assignee
his rights under the contract of insurance,
unless there be an express or implied
agreement with the assignee to that effect.
But the provisions of this section do not affect
transmission of interest by operation of law.

Measure of Insurable value

Subject to any express provision or

valuation in the policy, the insurable value
of the subject-matter insured must be
ascertained as follows:-
(1) In insurance on ship, the insurable value
is the value, at the commencement of the
risk, of the ship, including her outfit,
provisions, and stores for the officers and
crew, money advanced for seamen's wages,
and other disbursements (if any) incurred to
make the ship fit for the voyage or
adventure contemplated by the policy, plus
the charges of insurance upon the whole:

Contd.

The insurable value, in the case of

a steamship:- includes also the
machinery, boilers, and coals and
engine stores if owned by the assured;
In the case of a ship driven by
power other than steam includes also
the machinery and fuels and engine
stores, if owned by the assured; and in
the case of a ship engaged in a special
trade, includes also the ordinary
fittings requisite for that trade:

Contd.

(2) In insurance on freight, whether paid in

advance or otherwise, the insurable value is
the gross amount of the freight at the risk of
the assured, plus the charges of insurance:
(3) In insurance on goods or merchandise,
the insurable value is the prime cost of the
property insured, plus the expenses of and
incidental to shipping and the charges of
insurance upon the whole:
(4) In insurance on any other subjectmatter, the insurable value is the amount at
the risk of the assured when the policy
attaches, plus the charges of insurance.

Insurance is uberrimae fidei

A contract of marine insurance is a

contract based upon the utmost good
faith, and if the utmost good faith be not
observed by either party, the contract
may be avoided by the other party.
Disclosure by assured:
1) Subject to the provisions of this
section, the judgment of a prudent
insurer in fixing the premium, or
determining whether he will take the
risk.

Contd.
3) In the absence of inquiry the following circumstances
need not be disclosed, namely:(a) any circumstance which diminishes the risk;
(b) any circumstance which is known or presumed to be
known to the insurer. The insurer is presumed to know
matters of common notoriety or knowledge, and matters
which an insurer in the ordinary course of his business as
such, ought to know;
(c) any circumstance as to which information is waived by
the insurer;
(d) any circumstance which it is superfluous to disclose by
reason of any express or implied warranty.
(4) Whether any particular circumstance, which is not
disclosed, be material or not is, in each case, question of
fact.
(5) The term "circumstance" includes any communication
made to, or information received by, the assured.

Disclosure by agent effecting insurance

Subject to the provisions of the preceding section

as to circumstances which need not be disclosed,
where an insurance is effected for the assured by
an agent, the agent must disclose to the insurer(a) every material circumstance which is known to
himself, and an agent to insure is deemed to know
every circumstance which in the ordinary
course of business ought to be known by, or
to have been communicated to, him; and
(b) every material circumstance which the
assured is bound to disclose, unless it comes to
his knowledge too late to communicate it to the
agent.

Illustration

Condition of the vessel at the

time of commencement of the
risk: It is normally material for the
insurer to know whether the vessel is
ready to sail or has already sailed,
Again the date of sailing may be
material
The characteristics of the port
including whether the port is
particularly subject to delay will also
be material facts.
Nature of the vessel:- History of

Contd.
Facts affecting voyage:- master has a record of
incompetence, the vessel should follow a route to
its destination which is usual.
Estimated date of arrival at port
When the contract is deemed to be concluded
?
A contract of marine insurance is deemed to be
concluded when the proposal of the assured is
accepted by the insurer,
whether the policy be then issued or not; and for the
purpose of showing when the proposal was accepted,
reference may be made to the slip, covering note or
other customary memorandum of the contract,
although it be unstamped.

NIA Co.Ltd. v. Ramachandran And Co

This revision petition was filed against the
order passed by the State Consumer Disputes
Redressal
Commission,
Andhra
Pradesh
whereby the State Commission directed the
petitioner to compensate the losses
The case of the respondent/ complainant
before the District Forum was that he had taken
a marine policy (Cargo) from the petitioner. The
said policy was not only renewed from time-totime but the amount of Rs. 10 lakhs which was
in the year 1992 was increased to Rs. 20 lakhs
on 11.3.1992 and thereafter to Rs. 30 lakhs on
13.3.1992.

Facts:

During the subsistence of the policy,

complainant
despatched
on
17.4.1992, 274 bags of dry chilies
weighing a total of 90 quintals in net,
through Lorry to Delhi, the consignee
being M/ s. Ram Krishan Kailash
Chand, Commission Agent at Delhi.
On 25.4.1992 the complainant learnt
from the 1st respondent that the
driver of the said Lorry sold away part
of the consignment goods en route
about 17 quintals.

Contd.

The complainant/respondent
thereafter took possession of the
remaining stock and lodged a claim
with the petitioner for the losses.
The Surveyor visited the site and
checked up the record of the
respondent and found that value of
stock which had been despatched by
the complainant was Rs. 48,73,500/whereas the policy was for Rs.
30,00,000/-.
The petitioner accordingly repudiated

Contd.

The complainant alleged that right

from beginning on 9.1.1992, no
policy was delivered to him except
cover note and declaration forms.
The conditions of the policy relied
upon by the petitioner, were
admittedly never communicated or
otherwise made known to him nor
accepted by the complainant.

Condition as per the policy:

The said condition No. 2 of the Marine Open

Policy reads as under:
"Warranted that until completion of this
contract the assured is bound to declare each
and every dispatch coming within the scope
of the policy to the company's office at
Warangal in the declaration sheet intended for
this purpose within 24 hours of the receipt of
the relative documents of each dispatch
without any commission whatsoever. Should
the insured wilfully fail to report despatches
covered by this policy, the policy to all
subsequent
despatches
shall
at
the
company's option stand null and void."

Contd.

The respondent-complainant submitted that

only the cover note and the schedule to the
insurance policy were supplied by the
opposite party and that the terms and
conditions incorporated in the standard
policy had not been communicated to the
insured.
The cover-note inter alia mentions that the
risk is subject to the usual terms and
conditions of the standard policy and it is
equally the responsibility of the respondent
to call or these terms and conditions even if
they were not sent by the appellant as
alleged

Contd.
it is prima facie responsibility of the Insurance
Company who have knowledge about the terms of
policy to communicate the terms and conditions to
the insured and they cannot sit back after issuing
the cover note. If they do not do so within a
reasonable time they do so at their own peril.
In the present case when Insurance Company not
only accepted the premium but also issued cover
note on each occasion when the value was
enhanced had more than enough time and
opportunity to communicate the terms and
conditions to the insured.
Even at the time of giving the declaration forms to
the insured they should tell the complainant that to
cover the risk, the declaration must be filed with
the Insurance Company of every consignment.

Contd.
No document has been pointed out
wherein the Insurance Company may
have pointed out that the limit applies to
the total dispatches whether declared or
not.
In that view of the matter Insurance
Company cannot take shelter behind this
uncommunicated clause and the Forum
below have rightly decided the case
against it and called upon the Insurance
Company to compensate the insured for
the losses to the extent mentioned above.

Shree swastick trading co. v. O.I.C. Ltd.

The
Vessel,
BISMIVOY:34
commenced its voyage from Bombay
to Beharin on 20.3.1995 at 20.30 hrs.
and the duration of the journey was
to be about 8 days.
On 27.3.1995, unfortunately, the
vessel capsized. The Complainant
received the information of the
incident on 29.3.1995.
That very day, Insurance company
was intimated and the claim was

Contd.

The Oriental Insurance Co. Ltd objected

for the claims on the ground that Bill of
Lading dated 15.2.1995 with a 'Shipped
on
Board'
stamp
submitted
by
complainant, whereas on investigation
it was found that loading of the
consignments actually took place
between March 9th to 14th, 1995.
Since it was a case of pre-dating of
loading which was unlawful, and had
taken the expert opinions on the same
issue.

Contd.

The experts advised that the adventure had been

carried out by user of fraudulent documentation and
that there has been a breach of the implied warranty
of legality in the Marine Insurance Act and with the
result the Insurance Policy was unenforceable
Section 25 of the Policy which requires that Policy
must specify :1) "the name of the assured, or of some person who
effects the insurance on his behalf;
2) the subject-matter insured and the risk insured
against;
3) the voyage, or period of time, or both, as the case
may be covered by the insurance
4) the sum or sums insured;
5) the name of names of the insurer or insurers"

Contd.

It is an admitted fact that all these details which

were material have been disclosed and have been
so recorded in the declarations made and the
policies issued by the insurer.
the risk on the cargo commence from the time it
was loaded on board the ship. It was mentioned in
one of the declarations that "ETD-8/3/95" and the
cargo was loaded only between 9th and 14th March
and as such the period for which the insurer was on
risk got reduced/diminished.
The compliant objected by relying upon Clause (a)
of Sub Section (3) of Section 20 of the Act clearly
mentions that unless specifically enquired there is
no obligation on the part of the insured to disclose
such a circumstances which diminishes the risk.

Contd.

It is also common knowledge that in the

shipping industry, due to stiff competition to
secure freight, the ship owners/Agents do assist
and co-operate with the shippers by issuing Bill
of Lading with "Shipped on Board" endorsement
without the goods being actually loaded, to
enable the shippers to negotiate the documents
and bill of the lading with Bankers within the
time limit fixed as per the letter of credit.
This market practice is expected to/presumed to
be known to the insurer and the clause (b) subsection (3) of Section 20 of the Act, specified
that such circumstances which insurer is
presumed to know need not be disclosed unless
specifically enquired from the insured.

Contd.

Prof. E.R. Hardy Ivamy in his book, "Marine

Insurance" has quoted a classic old case
'Carter Vs. Boehm (1766, 3 Burr 1905 at
page 1910), in which Lord Mansfield
illustrated this point when he said:
"The underwriter needs not be told what
lessons the risque agreed and understood to
be run by the express terms of the policy....
If he insures for three years, he need not be
told any circumstances to show it may be
over in two; or if insures a voyage, with
liberty of deviation, he needs not be told
what tends to show there will be no
deviation."

Contd.

Similarly, in the present case, the

insurer did not base the policy of
insurance on the statement of the
goods tag "shipped on Board" on
15.2.95 and it was not a material
fact/circumstances
which
could
influence the judgment of a prudent
insurer in either fixing the premium
or in determining whether the risk
being taken or not
The commission directed insurance
company to pay the remaining

Representation.Contd.
Representations pending negotiation of contract
(1) Every material representation made by the assured or his agent
to the insurer during the negotiations for the contract, and before the
contract is concluded, must be true If it be untrue the insurer
may avoid the contract.
(2) A representation is material which would influence the
judgment of a prudent insurer in fixing the premium, or
determining whether he will take the risk.
(3) A representation may be either as to a matter of fact, or as to a
matter of expectation or belief.
(4) A representation as to a matter of fact is true, if it be substantially
correct, that is to say, if the difference between what is represented
and what is actually correct would not be considered material by a
prudent insurer.
(5) A representation as to a matter of expectation or belief is true
if it be made in good faith.
(6) A representation may be withdrawn or corrected before the
contract is concluded.
(7) Whether a particular representation be material or not, is, in
each case, a question of fact.

U.I.I.Co.Ltd. v. Andrew Vivera

It is the case of the respondent that apart from the
policy of insurance he had taken monsoon coverage in
respect of the boat for one month. It was further stated
that the boat was in good condition. on 13-6-1981 the
boat sailed from Cochin with the members of the crew,
and that on 15-6-1981, he came to know that the boat
which was drifted away by violent waves met with
accident. The respondent sent notice claiming an
amount of Rs.69,735/- as damages from the petitioner.
The surveyor who conducted the survey had auctioned
the engine of the boat and it was purchased by the
respondent himself for a sum of Rs. 15,401/- and
claimed the balance amount in the suit. The Ins.Co.
filed written statement contending that there was no
policy for the monsoon coverage and hence they are
not liable to pay any amount to the respondent.

Contd.

The boat was insured against the

total loss, salvage charges etc. The
respondent says that he took up
monsoon coverage for one month
with effect from 12-6-1981 through
Mr. Charles, the Development Officer.
The respondent relies on Ext. A-5 to
substantiate his contention that he
had paid the amount to the Insurance
Company for the monsoon coverage.
Ext. A-5 is the receipt obtained by the
respondent.

Contd.
In the written statement Company only stated
that there is no concluded contract to cover
monsoon coverage and so they are not liable
to the plaintiffs claim.
In the written statement, they have not stated
neither Ext. A-5 is a bogus document nor it is
invalid or not stated that Charles was not a
competent officer to receive the premium. But
in the evidence, they contended that Ext. A-5
is the result of foul play.
They have not adduced any evidence to prove
that Ext. A-5 cannot be acted upon.
It is also pertinent to note that the suit notice
remained without any reply.

Contd.

Order 6, Rule 4, C.P.C. provides that in all cases in which the

party pleading relies on any misrepresentation, fraud,
breach of trust, willful default, or undue influence, and in all
other cases in which particulars may be necessary beyond
such as are exemplified in the forms aforesaid, particulars
(with dates and items if necessary) shall be stated in the
pleading
It is trite law that where allegations are made in a vague
and sweeping manner the Court cannot act on it for lack
of specific pleadings even if the allegations are
worded in a very assertive language.
As Order 6, Rule 4 makes it incumbent upon a party to
highlight all particulars necessary to substantiate the
contentions regarding misrepresentation, fraud, breach of
trust, willful default or undue influence, a party cannot shirk
that responsibility and shelve it to be adduced in evidence
at a later stage. If the pleadings are vague and not specific
no amount of evidence can salvage the position.

Contd.
There is hardly any evidence to hold that plaintiff was
guilty of suppression of any material facts when the
proposal was made. And there was no evidence to hold
that the plaintiff committed any fraud upon the defendants.
Section 23 of the Marine Insurance Act provides that a
contract of marine insurance is deemed to be concluded
when the proposal of the assured is accepted by the
insurer, whether the policy be then issued or not; and for
the purpose of showing when the proposal was accepted,
reference may be made to the slip, covering note or other
customary memorandum of the contract, although it be
unstamped.
As Ext. A-5 shows that the amount of insurance was paid
for the monsoon coverage with effect from 12-6-1981 it is
difficult to accept the contention of the defendants that the
plaintiff is not entitled to claim the suit amount as no
insurance policy as such was issued to him.
directed the Insurance company to pay remaining amount

Double insurance

(1) Where two or more policies are effected by or on

behalf of the assured on the same adventure and
interest or any part thereof, and the sums insured
exceed the indemnity allowed by this Act, the assured
is said to be over-insured by double insurance.
(2) Where the assured is over-insured by double
insurance(a) the assured, unless the policy otherwise provides,
may claim payment from the insurers in such order as
he may think fit, provided that he is not entitled to
receive any sum in excess of the indemnity
allowed by this Act;
(b) where the policy under which the assured claims is
a valued policy, the assured must give credit as against
the valuation, for any sum received by him under any
other policy, without regard to the actual value of the
subject-matter insured;

Contd.

(c) where the policy under which the

assured claims is an unvalued policy
he must give credit, as against the full
insurable value, for any sum received
by him under any other policy;
(d) where the assured received any
sum in excess of the indemnity
allowed by this Act, he is deemed to
hold such sum in trust for the insurers,
according to their right of contribution
among themselves

NIA.Co.Ltd. v. satish solvent Ltd

The insured had an open marine transit
policy for a period of 12 months or till the
sum assured gets exhausted by
declarations, whichever is earlier.
The condition of the policy was as under: It is a condition of this insurance that a
assured is bound and will declare each and
every dispatch coming under the scope of
open policy without any exception within
24hrs or as may be agreed from time of
issue
of
the
railway
receipt/lorry
receipt/postal/air ways

Contd.

The consignment of edible oil sent by

the insured got damaged and there
fore claim was preferred.
It was found that the insured had
sent consignment worth of Rs.4.25
crores
It was found that the insured had not
given declarations about all
dispatches
The commission held that it was a
violation of policy especially the
condition mentioned in it

Warranty
The English law of marine insurance
warranties has been a focus for
criticism among academics and the
legal profession for many years.
Under
current
English
marine
insurance law, the concept of
warranty refers to a terms of the
policy, which must be strictly
complied with by the insured, and
any breach will discharge the insurer
from his liability automatically as
from the date of breach.

Defence of Warranty
Bank of Nova Scotia v. Hellenic Mutual War Risks
Association (Bermuda) Ltd
That breach of warranty would put the risk to an end
automatically as from the time of breach. This rule has
been held applicable to both marine and non-marine
insurance contracts. Breach of warranty is one of the
technical defences that insurers can use to defeat liability
for claims.
The unique characteristic of warranty is that materiality
and causation are irrelevant. It is submitted that the
rationale of warranty is that the insurer only accepts the
risk provided that the warranty is fulfilled.
The doctrine of warranty was necessary when it was
introduced into common law over three hundred years ago;
however, today it causes great hardship for the insured in
both marine and non-marine insurance contracts.

Jeffries v. Legandra
In the case, the policy read that warranted to depart
with convoy. The ship departed with her convoy when
she first set sail but was later separated from the
convoy by severe weather and after that was captured
by the French.
The first issue for trial in the case was what the true
meaning of those words in the warranty were, i.e. to
depart with convoy at the commencement of the
voyage only or depart with convoy for the whole
voyage.
The court decided that these words should be
construed according to the usage among the
merchants and the jury found in favor of the insured on
this point. It was held that the words to depart with
convoy, according to the usage among the merchants,
meant sail with convoy for the whole voyage

Contd.

The real point of interest in this case was

whether the stipulation on departure with
convoy was satisfied if she was afterwards
separated by tempest or captured.
The underwriter argued that the warranty made
the policy a conditional contract, an executory
promise upon an act done, and to be done to, or
by a stranger; and in such case it is not enough
to say, that it was endeavoured, or that the
circumstance was rendered impossible to be
observed by the act of God, and if the condition
was prevented from happening by the insureds
fault, the insured would lose the premiums, if
not, the contract was vitiated.

Contd.
However, the court did not take the underwriters
arguments on this point. They held that this
undertaking would have been satisfied in cases where
the ship was forced to separate from the convoy for
reasons other than the willful default of the master
and therefore the insurer was liable for the loss.
The Law in Lord Mansfields Time (1705-1793)
Materiality:
The first recorded warranty case heard by Lord
Mansfield is Woolmer v. Muilman, where the insured
ship and cargo were warranted to be neutral but were
in fact British property. The ship sank at sea, and the
underwriter refused to pay the claim.
The insured argued that the warranty was not material
to the risk. The court held that the underwriter was not
liable

Contd.

According to Lord Mansfield, there

was a falsehood, in respect to the
condition of the thing assured;
therefore, it was no contract. False
warranty in a policy of insurance will
vitiate it, though the loss happens in
a mode not affected by that falsity.
(So at that time, the court did not
really
recognize the difference
between
warranties
and
representations under utmost good
faith and confused the two)

Difference between warranty and

representation
Pawson v. Watson- In this case, when the
insured ship was represented to the underwriter
that the ship had 12 guns and 20 men on board.
However, the ship sailed with 27 men and boys
aboard, of whom only 16 were men, and nine
carriage guns and six swivels, which made the
ship have more force than it was represented.
The ship was captured by an American privateer.
The insurers denied liability and the case turned
on the question whether the assured had
warranted that the ship should literally have 12
guns and 20 men. The case raised a number of
interesting issues.

Contd.

Lord Mansfield first pondered the distinction between a

written and a parol representation.
Lord Mansfield said that, there is no distinction better
known to those who are at all conversant in the law of
insurance, than that which exists, between a warranty or
condition which makes part of a written policy, and a
representation of the state of the case.
Where it is a part of the written policy, it must be
performed: as if there be a warranty of convoy, there it
must be a convoy: nothing tantamount will do, or answer
the purpose; it must be strictly performed, as being part of
the agreement; for there it might be said, the party would
not have insured without convoy.
But as, by the law of merchants, all dealings must be fair
and honest, fraud infects and vitiates every mercantile
contract. Therefore, if there is fraud in a representation, it
will avoid the policy, as a fraud, but not as a part of the
agreement.

Contd.

In this view of Lord Mansfield, warranties and

representation are different in two ways: first, warranties
were contractual, written in the policy, whereas
representations were merely statements made during the
negation of the insurance and they were not necessarily
included in the policy;
secondly, warranties were different from representations in
their effects on breach. As in the case, the instructions
were not inserted or written into the policy, they were held
to be representations and there was no fraud in the
representation, therefore the underwriters should be liable.
The reasoning here seems to be that the effect of
misrepresentation
is
based
on
fraud:
material
misrepresentation involves fraud, so only material
misrepresentation will avoid the contract. By contrast, the
breach of warranty is based on contract, so even
immaterial breach of warranty is a breach of contract and it
will also avoid the contract.

Evolution of concept of excuse of

warranty
Another point that had also been considered
again in this century is that whether
breach of warranty can be excused if
the breach of warranty was caused by
something out of the insureds control.
Bond v. Nutt, the ship was warranted to
have sailed on or before a particular day.
The ship actually sailed before that date
from her port of lading to another port to
join the convoy; however, the ship was later
detained there by an embargo beyond the
date of sailing warranted in the policy.

Cond.

The underwriter defended the case by arguing

that a strict departure by the precise day
specified in the policy, is of the very essence of
the contract. It is a condition precedent which
must be complied with, or the underwriter will
not be liable and it is an express condition
which neither storm nor enemies, unless
complied with, can excuse.
It is clear in the underwriters defence that the
breach of warranty cannot be excused whether
the breach is intentional or by accident,
because strict compliance of the warranty is
the ground on which the contract was based.

Contd.
Lord Mansfield directed them by saying that:
The policy was made upon the contingency of a
fact which must have existed one way or the
other at the time the policy was underwritten.
That contingency was, that the ship should have
sailed on or before the 1st of AugustThe question
then is a matter of fact; and one that admits of no
latitude, no equity of construction, or excuse.
Had she or had she not sailed on or before that
day? No matter what cause prevented her; if the
fact is, that she had not sailed, though she stayed
behind for the best reasons, the policy was void:
the contingency had not happened; and the party
interested had a right to say, there was no
contract between them.

Lilly v Ewer

In which the ship was also warranted to

depart with convoy but later was separated
from her convoy by perils of the sea.
Lord Mansfield said that though the convoy
for the whole voyage is clearly intended, an
unfortunate separation is an accident to which
the underwriter is liable. This reasoning
seems to say that accidental separation is
allowed to be not a breach of warranty.
The reasoning in Lilly v Ewer seems to say
that when the accident that caused the
breach of warranty was a peril of the sea
insured against in the policy, the assured was
still covered despite of the breach.

In eighteenth century,

The rules laid down during this

period were that warranties, whether
material or not, must be literally
complied with, and breach of
warranty would avoid the contract ab
initio.

The 19th Century IRules of

Implied Warranties
warranties of seaworthiness and
legality.
Around the beginning of the 19th
century, the point of seaworthiness
was frequently considered in the
courts and it was held there was an
implied warranty of seaworthiness by
law in every voyage marine
insurance contract

Warranty of Seaworthiness

Dixon v Sadler- In the case of an

insurance for a certain voyage, it is
clearly established that there is an
implied warranty that the vessel shall
be seaworthy,
by which it is meant that she shall be
in a fit state as to repairs,
equipment, and crew, and in all other
respects, to encounter the ordinary
perils of the voyage insured, at the
time of sailing upon it.

Contd.

If the assurance attaches before the voyage

commences, it is enough that the state of
the ship be commensurate to the then risk;
and, if the voyage be such as to require a
different complement of men, or state of
equipment, in different parts of it, as, if it
were a voyage down a canal or river, and
hence across the open sea, it would be
properly manned and equipped for it.
But the insured makes no warranty to the
underwriters that the vessel shall continue
seaworthy, or that the master or crew shall
do their duty during the voyage

Dixon v. Sadler
There is seaworthiness for the port, seaworthiness
in some cases for the river, and seaworthiness in
some cases, as in a case that has been put forward
of a whaling voyage, for some definite, wellrecognized, and distinctly separate stage of the
voyage.
This principle has been sanctioned by various
decisions; but it has been equally well decided that
the Vessel, in cases where these several distinct
stages of navigation involve the necessity of a
different equipment or state of seaworthiness, must
be properly equipped, and in all respects seaworthy
for each of these stages of the voyage respectively
at the time when she enters upon each stage,
otherwise the warranty of seaworthiness is not
complied with

Cond.

the standard of seaworthiness varies

according to the different voyages
undertaken and if the insured
adventure is divided into several
stages,
seaworthiness should be decided by
reference to the circumstances of
each stage at the commencement
thereof.

Indeed,
the
concept
of
seaworthiness is a relative one and it

Legality
In Gray v. Lloyd, the British ship carrying goods
from the Cape to the Isle of Bourbon was lost by
hostile capture.
The underwriter rejected the claim on the ground
of illegality because the adventure was not
confined to the sort of goods specified in the
license and the adventure was also a breach of
the monopoly of the East India Company.
The court held that it was an illegal voyage and
underwriter was not liable. It is interesting to note
that the court commented in this case that it
[warranty of legality] is an objection open for
the underwriters to take, if they choose it; though
the objection, being a bare legal one, is not to be
favored.

MIA 1906
Due to the drafting efforts of Sir M. D. Chalmers, a
Bill entitled the Marine Insurance Codification Bill
was introduced in the House of Lords in 1894.
Eventually, the Act under the title of An Act to
Codify the Law relating to Marine Insurance was
enacted in 1906.
As the name indicates, it did not set out to remodel
the law relating to marine insurance, but merely to
codify previous decisions and customary practice.
In Marine Insurance Act, 1906-Sections 33-41 set
out the rules of the warranties.
A warranty is a promise by the insured to the
underwriter that something shall or shall not be
done, or that a certain state of affairs does or does
not exist

Contd.

A warranty must be literally and strictly

complied with, as otherwise subject to the
two statutory exceptions,

(a) where owing to a change of

circumstances the warranty is no longer
applicable, and
(b) where compliance would be unlawful
owing to the enactment of a subsequent
law, the underwriter is discharged from
liability as from the date of the breach. A
breach of warranty may be waived by the
underwriter. The Act also provides that
warranties can be express or implied

The MIA 1963

Nature of warranty
(1)A warranty, in the following sections relating to
warranties, means a promissory warranty, that is
to say a warranty by which the assured
undertakes that some particular thing shall or
shall not be done, or that some condition shall
be fulfilled, or whereby he affirms or negatives the
existence of a particular state of facts.
(2) A warranty may be express or implied.
(3) A warranty, as above defined, is a condition which
must be exactly complied with, whether it be material
to the risk or not. If it be not so 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.

Excuse of breach of warranty

(1) Non-compliance with a warranty is

excused when by reason of a change of
circumstances, the warranty ceases to be
applicable to the circumstances of the
contract, or when compliance with the
warranty is rendered unlawful by any
subsequent law.
(2) Where a warranty is broken, the assured
cannot avail himself of the defense that the
breach has been remedied, and the warranty
complied with, before loss.
(3) A breach of warranty may be waived by
the insurer

Express warranties
(1)An express warranty may be in any form of
words from which the intention to warrant is
to be inferred.
(2) An express warranty must be included in,
or written upon the policy, or must be
contained in some document incorporated by
reference into the policy.
(3) An express warranty does not exclude
implied warranty, unless it be inconsistent
therewith.

Contd.

Warranty of neutrality:
(1) Where insurable property, whether
ship or goods, is expressly warranted
neutral, there is an implied condition
that the property shall have a neutral
character at the commencement of the
risk, and that , so far as the assured
can control the matter, its neutral
character shall be preserved during
the risk.

Contd.
2) Where a ship is expressly warranted "neutral",
there is also an implied condition that, so far as
the assured can control the matter she shall be
properly documented, that is to say, that she
shall carry the necessary papers to establish her
neutrality, and that she shall not falsify or
suppress her papers, or use simulated papers If
any loss occurs through breach of this condition,
the insurer may avoid the contract.
No. implied warranty of nationality
There is no implied warranty as to the
nationality of a ship or that her nationality shall
not be changed during the risk.

Contd.

Warranty of good safety

Where the subject-matter insured is warranted
"well" or "in good safety" on a particular day, it
is sufficient if it be safe at any time during that
day.
Warranty of legality
There is an implied warranty that the
adventure insured is a lawful one, and that,
so far as the assured can control the matter,
the adventure shall be carried out in a lawful
manner.

Warranty of seaworthiness of ship

(1) In a voyage policy there is an implied warranty
that at the commencement of the voyage the ship
shall be seaworthy for the purpose of the
particular adventure insured.
(2) Where the policy attaches while the ship is in port,
there is also an implied warranty that she shall, at
the commencement of the risk, be reasonably fit to
encounter the ordinary perils of the port.
(3) Where the policy relates to a voyage which is
performed in different stages, during which the ship
requires different kinds of or further preparation or
equipment, there is an implied warranty that at
the commencement of each stage the ship is
seaworthy in respect of such preparation or
equipment for the purposes of that stage.

Contd.

(4) A ship is deemed to be seaworthy when

she is reasonably fit in all respects to
encounter the ordinary perils of the
seas of the adventure insured.
(5) In a time policy there is no implied
warranty that the ship shall be
seaworthy at any stage of the
adventure, but where, with the privity of
the assured, the ship is sent to sea in an
unseaworthy state, the insurer in not liable
for
any
loss
attributable
to
unseaworthiness.

Implied condition as to commencement of risk

(1) Where the subject-matter is insured by a

voyage policy "at and from" or "from" a particular
place, it is not necessary that the ship should be
at that place when the contract is concluded, but
there is an implied condition that the adventure
shall be commenced within a reasonable time, and
that if the adventure be not so commenced
the insurer may avoid the contract.
(2) The implied condition may be negative by
showing that the delay was caused by
circumstances known to the insurer before
the contract was concluded, or by showing that he
waived the condition.

Contd.

Alteration of port of departure

Where the place of departure is
specified by the policy, and the ship
instead of sailing from that place sails
from any other place, the risk does
not attach.
Sailing for different destination
Where the destination is specified in
the policy, and the ship, instead of
sailing for that destination, sails
for any other destination, the risk
does not attach.

Change of voyage

(1) Where, after the commencement of the

risk, the destination of the ship is voluntarily
changed from the destination contemplated
by the policy, there is said to be a change of
voyage.
(2) Unless the policy otherwise provides, where
there is a change of voyage, the insurer is
discharged from liability as from the time
of change, that is to say, as from the time
when the determination to change it is
manifested; and it is immaterial that the ship
may not in fact have left the course of voyage
contemplated by the policy when the loss
occurs

Deviation

(1) Where a ship, without lawful excuse, deviates

from the voyage contemplated by the policy, the
insurer is discharged from liability as from the time of
deviation, and it is immaterial that the ship may have
regained her route before any loss occurs.
(2) There is a deviation from the voyage contemplated
by the policy(a) where the course of the voyage is specifically
designated by the policy, and that course is departed
from; or
(b) where the course of the voyage is not specifically
designed by the policy, but the usual and
customary course is departed from.
(3) The intention to deviate is immaterial; there must
be a deviation in fact to discharge the insurer from his
liability under the contract.

Several ports of discharge

(1)Where several ports of discharge are

specified by the policy, the ship may proceed to
all or any of them, but, in the absence of any
usage or sufficient cause to the contrary, she
must proceed to them, or such of them as she
goes to, in the order designated by the
policy. If she does not there is a deviation.
(2)Where the policy is to"ports of discharge",
within a given area, which are not named, the
ship must, in the absence of any usage or
sufficient cause to the contrary, proceed to
them, or such of them as she goes to, in their
geographical order. If she does not there is a
deviation.

Excuse for deviation or delay

(1)Deviation or delay in prosecuting the
voyage contemplated by the policy is
excused-(a)where
authorised
by
any
special term in the policy; or
(b)where caused by circumstances beyond
the control of the master and his employer;
or
(c)where reasonably necessary in order to
comply with an express or implied warranty;
or
(d)where reasonably necessary for the
safety of the ship or subject- matter insured;
or

Contd.
(e)for the purpose of saving human life or
aiding a ship in distress where human life may
be in danger; or
(f)where reasonably necessary for the
purpose of obtaining medical or surgical
aid for any person on board the ship; or
(g)where if barratry be caused by the
barratrous conduct of the master or
crew, one of the perils insured against.
(2)When the cause excusing the deviation or
delay ceases to operate, the ship must
resume her course, and prosecute her
voyage, with reasonable despatch

When and how policy is assignable

(1)A marine policy may be transferred by
assignment unless it contains terms expressly
prohibiting assignment. It may be assigned either
before or after loss.
(2)Where a marine policy has been assigned so as to
pass the beneficial interest in such policy, the
assignee of the policy is entitled to sue thereon
in his own name; and the defendant is entitled to
make any defence arising out of the contract which
he would have been entitled to make if the suit had
been brought in the name of the person by or on
behalf of whom the policy was effected.
(3)A marine policy may be assigned by
endorsement thereon or in other customary
manner.

Assured who has no interest cannot

assign
Where the assured has parted
with or lost his interest in the
subject- matter insured, and has
not, before or at the time of so doing
expressly or impliedly agreed to
assign the policy, any subsequent
assignment of the policy is
inoperative:
Provided that nothing in this section
affects the assignment of a

Included and excluded losses

(1)Subject to the provisions of this Act, and unless
the policy otherwise provides, the insurer is
liable for any loss proximately caused by a
peril insured against, but, subject as aforesaid,
he is not liable for any loss which is not
proximately caused by a peril insured against.
(2)In particular--(a)the insurer is not liable for any
loss attributable to the wilful misconduct of the
assured, but, unless the policy otherwise
provides, he is liable for any loss proximately
caused by a peril insured against, even though the
loss would not have happened but for the
misconduct or negligence of the master or crew;

Contd.

(b)unless the policy otherwise

provides, the insurer on ship or
goods is not liable for any loss
proximately caused by delay,
although the delay be caused by a
peril insured against;

Loss and Abandonment

This term applies to marine insurance

particularly where there is a total loss.
The act of relinquishment or the act of an
insured in surrendering all rights of
damaged or lost property to insurer as a
total loss.
In case of constructive total loss, there must
be a notice of abandonment, failing which
the loss shall be treated as partial one.
The notice may be oral or in writing but it
must show the intention to abandon the
insured interest unconditionally. Once the
notice is accepted it is irrevocable.

Constructive total loss

There is constructive total loss, where the

subject matter insured is reasonably
abandoned an account of actual loss
appearing to be unavoidable or because
it could not be presumed from actual loss
without an expenditure which would
exceed its value when the expenditure
had been incurred.
Ex: If he is not insured, he will not spend
on it if the amount required would exceed
the value of the ship recovered and
repaired. He would rather abandon her.

Contd.

The act gives him the same right if he has

insured to claim of indemnity from the
insurer for a constructive total loss of the
ship.
Where there is a constructive total loss, the
assured may either treat the loss as a partial
loss or abandon the subject matter insured
to the insurer and treat the loss if it were an
actual total loss.
Constructive total loss: there is a
constructive total loss
(i) where the assured is deprived of the
possession of ship or goods by a peril
insured against and

Contd.

(a) it is unlikely that he can recover the

ship or goods.
(b) the cost of recovering the ship or
goods as the case may be would exceed
their value when recovered. Or
(ii) in case of damage to ship-the cost of
repairing the damage would exceed the
value of the ship when repaired
(iii) In case of damage to goods- where
the cost of repairing the damage and
forwarding the goods to their destination
would exceed their value on arrival.

Notice of abandonment

Where the assured elects to abandon the

subject matter insured to the insurer, he
must give notice of abandonment and if
fails to do so, the loss can only be
treated as a partial loss.
Notice of the abandonment may be given
in writing or by words of mouth or partly
in writing and partly by words of mouth
Notice must be properly given, the rights
of the assured are not prejudiced by the
fact that the insurer refuses to accept the
abandonment.

Contd.

The acceptance of an abandonment

may be express or implied from the
conduct of the insurer
where
the
notice
of
the
abandonment is accepted, it is
irrevocable
Where the insurer has reinsured the
risk, no notice of abandonment need
to be given to him.

Double Insurance

(1)Where two or more policies are effected by

or on behalf of the assured on the same
adventure and interest or any part thereof, and
the sums insured exceed the indemnity
allowed by this Act, the assured is said to
be over- insured by double insurance.
(2)Where the assured is over- insured by
double insurance (a)the assured, unless the policy otherwise
provides, may claim payment from the insurers
in such order as he may think fit, provided that
he is not entitled to receive any sum in
excess of the indemnity allowed by this
Act;

Contd.
(b)where the policy under which the assured
claims is a valued policy, the assured must give
credit as against the valuation, for any sum
received by him under any other policy, without
regard to the actual value of the subject- matter
insured;
(c)where the policy under which the assured
claims is an unvalued policy he must give credit,
as against the full insurable value, for any sum
received by him under any other policy;
(d)where the assured receives any sum in excess
of the indemnity allowed by this Act, he is
deemed to hold such sum in trust for the
insurers,
according
to
their
right
of
contribution among themselves.

Effect of abandonment and operation

of subrogation

Sec-63:
If
there
is
a
valid
abandonment, the insurer is entitled
to take over the interest of the
assured in whatever may remain of
the subject-matter insured, and all
proprietary rights incidental there to.

CIF Contract and Insurance Liability

Lord Atkinson inJohnson v Taylor Bros & Co
Ltd[1920] AC 144
Contract on CIF (cost, insurance, freight) terms,
shifts burden of responsibilities in international sale
transaction onto the sellers side, who is to do
the following things: First, to make out an invoice of the goods sold.
Second, to ship at the port of shipment goods of the
description contained in the contract.
Third to procure a contract of affreightment under
which the goods will be delivered at the port
contemplated by the contract.
Fourth, to arrange for an insurance upon the terms
current in the trade which will be available for the
benefit of the buyer.

Contd.
Fifthly, with all reasonable dispatch to send
forward and tender to the buyer theseshipping
documents, namely, the invoice,bill of lading
and policy of assurance, delivery of which to the
buyer is symbolical of delivery of the goods
purchased, placing the same at the buyers risk
and entitling the seller to payment of the price.
Thus, in a cif contract, the seller makes all of
the shipping arrangements. The buyers duty is
to paythe price on the tender ofdocuments
covering those goods, to take delivery and to
pay import duty. Physical delivery of the
goods is not a condition of cif contract.

Contd.
the object and the result of a c.i.f. contract is to
enable sellers and buyers to deal with cargoes or
parcels afloat and to transfer them freely from
hand to hand by giving constructive possession of
the goods which are being dealt with.
In other words, cif terms allows international
traders to sell and resell commodities several
times while they are afloat under so-called chain
contracts.
Accordingly, physical delivery is an indispensable
requisite of a finalsale contractonly, while all
intermediatetransactions done by passing the
property from the seller to the buyer withshipping
documentsand
not
with
goods.

Cond.
Scrutton J in Arnold Karberg & Co v. Blythe, Green Jourdain
& Co [1915] 2 K.B. 379
It is not a contract that goods shall arrive, but a contract to
ship goods complying with thecontract of sale, to obtain,
unless the contract otherwise provides, the ordinary
contract of carriage to the place of destination and the
ordinary contract of insurance of the goods on that voyage,
and to tender these documents against payment of the
contract price.
So far as physical arrival of the goods to the buyer is
not a condition of cif contract, it does not mean that the
goods may never have been shipped, on the contrary,only
provided they are shipped and available for trade there is no
requirement that they actually arrive for the buyer to pay
price
Once the goods shipped, thesale contractcan be
nevertheless concluded even if they have been lost in
transit.

Insurance Liability

Set ofshipping documentsgenerally consist of

a cleanbill of lading,
amarine insurancepolicy or
certificatecovering the usual marine risks and
any agreed additional risks
plus an invoice.
Thus, thebill of ladingand the insurance policy
provides continuous cover from the port of
shipment to the port of discharge, so that the c.i.f.
buyer, whatever happens to the goods, will have
either acause of actionfor loss or damage to the
goods underbill of ladingcontract against:
i) the carrier under the contract of carriage, and
ii) the insurer under the policy of insurance.

Cond.
InManbre Saccharine Co, Ltd v. Corn Products Co,
Ltd[1918-19] All ER Rep 980
McCardie. J. observed that,
If the vendor fulfils his contract by shipping the
appropriate goods in the appropriate manner
under a proper contract of carriage, and if he also
obtains the proper documents for tender to the
purchaser, I am unable to see how the rights or
duties of either party are affected by the loss of
ship or goods, or by knowledge of such loss by the
vendor prior to actual tender of the documents. If
the ship be lost prior to tender, but without the
knowledge of the seller, it was, I assume, always
clear that he could make an effective proffer of the
documents to the buyers.

Contd.
In my opinion, it is also clear that he can
make an effective tender even though he
possessed at the time of tender of actual
knowledge of the loss of the ship or goods.
For the purchaser in case of loss, will get
the document he bargained for, and if the
policy be that required by the contract
and if the loss be covered thereby, he will
secure the insurance moneys.
The contingency of loss is within and not
outside the contemplation of the parties to
a cif contract.

Free on board

President of India v. MetcalfeShipping Co[1970]

1 Q.B. 289, CA
The term fob stands for "free on board" and
represents a type ofsale contracts under which
the buyer generally takes all the risks and
expenses from the moment the goods crossed
ships rail.
When the goods sold on fob terms the buyer is
to nominate the ship and the seller undertakes
to place the goods on board of ship at an agreed
port of shipment. The seller bears all expenses
and charges related to delivery of the goods on
board of ship, and also he is under the duty to
obtain exportlicense.

Cont.
Shipping:
The stores shall be delivered by the sellers free
on board stowed on such vessels as may be
nominated by the purchaser.
Inspection certificates, advice notes, packing
accounts and invoices in such manner as may be
required by the Director-General, India Store
Department, shall be furnished by and at the
cost of the sellers.
The term FOB vessel port of loading means:
(a) Loaded and stowed or trimmed on board
overseas vessel at named port of loading, free of
expense to purchaser.

Contd.
(b) That it shall be the responsibility of the sellers to do
the following:
(i) provide for and pay and bear all charges incurred in
placing goods actually on board the vessel designated
and provided by purchaser on the date or within the
period fixed;
(ii) provide clean on board oceanbill of lading;
(iii) be responsible for any loss or damage or both until
goods have been placed actually on board the vessel
on the date or within the period fixed and clean on
board oceanbill of ladingis delivered to the purchasers
or the agent nominated by purchasers;
(iv) render purchaser or his authorised agents
assistance in obtaining the documents issued in
thecountry of originor of shipment, or of both, which
may be required for purpose of exportation.

Contd.

The buyer pays all subsequent

charges including cost of stowage of
the goods on board ship, freight
andmarine insurance, all expenses
related to unloading of the goods at
the destination, import duties and
consular fees.
By Lord Hewart C.J. inJ. & J.
Cunningham, Ltd. v. Robert A. Munro
& Co., Ltd.(1922) 13 Ll. L. Rep. 216

Contd.

Under such an agreement it was the

duty of the purchasers to provide a
vessel at the appointed place, at
such a time as would enable the
vendors to bring the goods alongside
the ship and put them over the ships
rail, so as to enable the purchasers
to receive them within the appointed
time

Contd.

The usual practice under such a

contract is for the buyer to nominate
the vessel and to send notice of her
arrival to the vendor in order that the
vendor may be in a position to fulfil his
part of the contract.
When the vendors tender the goods in
question to the purchasers theoretically
by placing them on the ships rail, it is
open to the purchasers to reject if the
goods are not in accordance with the
contract.

Contd.
This being the relationship between the parties
the liability on either side may be varied
(1) by express contract altering the place or date
of loading
(2) by the conduct of the parties.
The vendors gather their vegetables and send
them to the port; but the nominated ship does
not arrive for a fortnight, during which time the
vegetables go bad.
It may be that the purchasers are entitled to
reject the vegetables which have so deteriorated,
but the vendors are then entitled to rely upon
and bring into play another legal principle.

Contd.

It is not exactly an estoppels which prevents

the purchasers from rejecting, but it is the
doctrine that where one person makes a
statement
to
another
meaning
that
statement to be relied upon and acted upon
by that other, if the other suffers damage by
so relying and acting upon it he is entitled to
recover such damage from the person
making the statement.
In the case put forward the damage would
be the loss of price which the vendors would
otherwise
have
obtained
from
the
purchasers.

Contd.
Soufflet Negoce S.A. v Bunge S.A.[2010] EWCA
Civ 1102
Buyer has a right but not duty to examine the
goods upon delivery to him at the place of
destination and reject them if they do not meet
contractual specification. Risk of loss or damage
passes from the seller to the buyer on the
loading of the goods onto the vessel.
if the buyer assumes the risk of loading the
cargo into unclean holds the seller cannot reject
loading on the basis that holds are not clean
enough, because the state of the holds is not a
matter in which he has any real legitimate
interest.

Contd.

For example, there may be circumstances

which disentitle the purchaser to reject
the goods when they are being placed on
the ships rail, as for instance where he
has by his conduct already accepted
them before their arrival there;
there may also be circumstances where,
although the purchaser may be entitled to
reject when the goods are being placed
over the ships rail, yet the vendor may
be entitled to recover damages in respect
of the deterioration of the goods.

Contd.
Assuming the sale of a perishable cargo, say of
fresh vegetables for October shipment, suppose
the purchasers nominate their vessel and write to
the vendors saying "she will be at the quayside in
three days time.
" The vendors gather their vegetables and send
them to the quayside; but the nominated ship
does not arrive for a fortnight, during which time
the vegetables go bad.
It may be that the purchasers are entitled to
reject the vegetables which have so deteriorated,
but the vendors are then entitled to rely upon
and bring into play another legal principle.

National Insurance Co. Ltd v. Sky Gems

It is an appeal by National Insurance Co
against
M/s Sky Gems against the
judgment passed by the National
Consumer
Disputes
Redressal
Commission
The respondent-Sky Gems exported two
parcels of precious stones (Emerald) to
London through the Foreign Post Office,
New
Delhi
and
However,
the
consignment did not reach the consignee
and was believed to have been either
stolen or lost in transit.

Contd.

The respondent had taken two insurance

policies from the appellant-insurance company.
The total sum assured was Pound Sterling
85,740.55 (CIF value + 10%).
M/s. W.K. Webster & Company, London, were
appointed as investigators and their report
confirmed that the consignment had either been
lost or stolen. Non-delivery certificate was
issued by the Department of Posts (Foreign
Post), New Delhi, in respect of the consignment.
The postal authorities admitted their liability
and made payment at the rate of Rs. 10,254.50
for each parcel

Contd.

In respect of the two policies obtained

from
the
appellant-insurance
company, respondent preferred a
claim and the appellant agreed to
settle the same for Rs. 28,30,000.
The respondent claimed from the
appellant an amount of Pounds
Sterling 1,07,175.60 and insisted that
the payments be made in Pounds.

Contd.

For some reason or the other, there was a

delay in settlement of the claim and the
respondent filed a petition before the
National Commission.
The appellant resisted the claim and
contended that it was not liable to pay the
respondent in Pounds Sterling.
It was also contended that as the title in
the goods had not passed to the consignee,
the respondent continued to be the owner
of the goods and, therefore, the payment
could be effected only in Indian currency.

Contd.
The National Commission held that as the insurance
policies clearly stated that the claim was "payable at
London" and the declared invoice value and the insured
value of the consignments were in terms of Pounds
Sterling, the appellant was liable to pay to the respondent
in Pounds Sterling and ultimately ordered the appellant to
pay Pounds Sterling 85,740/- + 10% or Pounds Sterling
94,314/ The respondent was also held entitled to recover interest at
the rate prevalent on commercial borrowings in U.K. from
time to time The appellant was entitled to adjust the
amount of Rs. 20,000 received as compensation from the
postal authorities. A sum of Rs. 50,000/- was also ordered
as compensation for delayed payment.
This Order of the National Commission has been
challenged
before supreme court

Supreme court observations

The consignee of these goods had approached M/s. W.K.
Webster & Company for the settlement of the claim and
there was correspondence between the consignee and
M/s. W.K. Webster & Company.
Accordingly It was found that as per the letter dated 2nd
April, 1991, M/s. W.K. Webster & Co had asked the
consignee, M/s Emdico (London) Limited, for the original
Policies of Insurance together with all correspondence
exchanged with the postal authorities concerning their
liability, and also a clarification as to whether they
had remitted full payment of the value of the
missing merchandise to the Indian suppliers.
In another letter dated 20th June, 1991, M/s. W.K.
Webster & Co. offered to settle the claim as soon as
they received the necessary documentation from India

Contd.
The consignee, Emdico (London) Limited, sent a
reply to M/s. W.K. Webster & Co. on 8th April,
1991 and the last paragraph of their letter reads
as follows: "As regards the question whether we have
remitted full payment of the value of the missing
merchandise to our Indian suppliers, the
answer is that we haven't done so and we
suggest that the settlement may be concluded
direct with Sky Gems in India, however, if you
will feel it is more convenient for you to deal with
us as the consignees of the goods, we shall be
happy to do so. One way or the other it doesn't
seem to make much difference."

Contd.

It is evident that the consignee, Emdico

(London) Limited, did not pay the value of
the missing merchandise
There is no evidence to show that the
necessary documents were endorsed in
favour of the consignee and that they
were transferred to them. These facts will
show that the title to the goods in
question had not passed to the consignee,
M/s. Emdico (India) Limited and the Sky
Gems Ltd continued to be the owner
having insurable interest over the
goods

Contd.

The respondent contended that the

goods were sent on CIF contract and the
moment the goods were consigned, the
title would pass to the consignee.
The court observed that, It is true that
the goods are ascertained, but even then
the title would pass based on the
contract between the parties.
The rights and liabilities of the parties in
a CIF contract have been described by
Lord Porter in Comptoir d' Achat vs. Luis
de Ridder; The Julia [1949] A.C. 293

Contd.

It is clear that the right of the buyer to claim

policy amount would arise when he obtained
title to the property and he must produce
the documents of transfer. Here, the buyer
was not in possession of any such
documents of title.
The letter written by the consignee, M/s.
Emdico (London) Limited on 8th April, 1991
clearly shows that they had not paid the
value of the missing merchandise and had
suggested to M/s. W.B. Webster & Co. that
the claim may be settled with the
respondent-Sky Gems in India.

Contd.
The consignee could not produce any documents
concerning their title to the goods before M/s. W.K.
Webster & Company and this evidently shows that
the title had not passed to the consignee at London.
The insurable interest over the goods
continued to be with the respondent. Under
such circumstances, the respondent is not
entitled to receive the payment in Pounds
Sterling.
And held that the respondent is entitled to get Rs.
28,30,000 with interest @ 18% from the date on
which it preferred the claim petition before the
appellant, till payment. The respondent is also
entitled to receive Rs.20,000 towards costs ordered
by the National Commission.

Kalyani Jethalal shah v. NIC

Insurance for total and constructive

loss only, whether partial loss is
payable?
A ship was purchased by the complainant
firm for breaking. A marine hull policy was
issued by the opposite party Insurance
company for journey of the ship from
Bombay Harbour to Powder works Bunder
Darukhana ship breaking yard.
The cover note mentioned the interest as
under: Interest insured Hull and Machinery trading
warranties total loss, constructive total loss,
.

Contd.

While at ship breaking yard, the labourers

employed by the ship breakers had left the
ship for lunch at the time the fire broke out
causing partial loss.
The claim was repudiated by the insurer on
several grounds.
The contention of the complainant was that
the risk covered under the policy included
any risk arising due to fire.
The insurance company strongly denied the
allegation and alleged that the words any
risk arising due to fire was not in the original
policy and that was the result of the
interpolations made by the insured.

Contd.

The commission was of the opinion

that the questionnaire filled by the
complainant at the time of insurance
showed that the insurance was for
total loss and constructive loss, and
the loss caused by the fire had been
incorporated
therein
by
the
including loss.
Thus total loss and constructive loss
that may be due to various causes
including fire.
The commission also found that the

Contd.

The commission referred various definitions in

marine Insurance Act (Sections. 56, 57 and 61)
and referred case law
Prince v. Maritime Insurance Co. Ltd.
In this case ship along with its cargo was insured
and the policy was constructive total loss. After
covering some distance only partial loss took
place.
It was held that since the loss was only partial
while the insurance was for total loss, the action
by the insured must fail. Repelling the argument
that it would be very inconvenient that persons
covering themselves by insurance should not be
entitled to recover because the entire ship and
cargo was not lost,

Cond.
Section-56. Partial and total loss.
(1)A loss may be either total or partial. Any loss other
than a total loss, as hereinafter defined, is a partial loss.
(2)A total loss may be either an actual total loss, or a
constructive total loss.
(3)Unless a different intention appears from the terms
of the policy, an insurance against total loss includes a
constructive, as well as an actual, total loss.
(4)Where the assured brings a suit for a total loss and
the evidence proves only a partial loss, he may, unless
the policy otherwise provides, recover for a partial loss.
(5)Where goods reach their destination in specie, but
by reason of obliteration of marks, or otherwise, they
are incapable of identification, the loss, if any, is partial
and not total.

Contd.
Section-57. Actual total loss.
(1)Where the subject- matter insured is
destroyed, or so damaged as to cease to be a
thing of the kind insured, or where the assured is
irretrievably deprived thereof, there is an actual
total loss.
(2)In the case of an actual total loss no notice of
abandonment need be given.
Section-61. Effect of constructive total loss.
Where there is a constructive total loss the
assured may either treat the loss as a partial
loss, or abandon the subject-matter insured to
the insurer and treat the loss as if it were an
actual total loss.

Contd.

Thus, the commission observed that in the

case in hand also the insured could have
covered him not only for total loss but also for
partial loss which they did not.
The commission also referred
Continental Grain co. Inc. v. Twitchell
Western Assurance co. of Toronto v. Poole
On the basis of the various definitions and the
observations in the above referred cases, the
commission observed that the principle is that
if a policy of insurance is taken for total loss, or
constructive total loss, the insurance company
will not be liable to pay the partial loss.

Contd.

The partial loss has to be separately

insured.
The commission also referred to
Section.56(4) of the Marine insurance
Act and observed that this section
enables
the
court
to
award
compensation even for the partial
loss when the claim is brought for
total loss, unless there are words in
the insurance policy ruling out the
possibility.
The commission referred to O May

Contd.

similarly, where the assured brings an action

for a total loss and the evidence proved only a
partial loss, Sec-56(4) of Marine Insurance Act
1906 states that the assured may recover for
a partial loss. If, of course, the policy
otherwise provides as, for instance, the
cover is against total loss only, there would
be no alternative claim for partial loss.
In the instant case, the commission observed,
there was no insurance against partial loss
and what had taken place was partial loss.
The claim was also for partial loss only. Thus
the complaint by the company was dismissed.