Introduction
It is said that marine insurance started sometime by the end 12th century in North Italy though some writers opine that it was in 3000 BC (not in the present form) when the Chinese merchants were dispersing their shipments along with several vessels with a view to minimize the damage to the shipments. Then a time came when the insurance of ships and cargo came in the form of bottomry that was essentially a monetary protection in the case the cargo is lost at sea or damaged. Then, the Danish sometime in 1132 started reimbursement of the loss occurring at sea.
When Italian merchant came to England, they brought with them this practice of marine 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. The merchants concerned with the marine insurance used to assemble In coffee house where the members of the Lloyds Association used to take marine insurance, or liability of marine perils, according to their financial position. Even today it is the leading party in whole of the world.
The marine insurance 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 that Act.
At present in our country the Marine Insurance Act, 1963, guides the marine insurance. This Act was made in order to codify the law relating to marine insurance. The Objects and Reasons of this Act throw light on what was the necessity for enacting this Act. According to it, the Indian Navy and Indian Shipping have undergone considerable expansion since Independence. As there was no Indian legislation to govern the marine insurance, it continued to be governed by the British Marine Insurance Act, 1906. At the same time the insurance contracts in India also became subject of the Indian Contract Act, 1872.
The insurance policy forms used in India were the English forms based on mercantile customs and business convention. At times, it appeared to be in conflict with the provision of Indian Contract Act which resulted in the own interpretation by the Court. To overcome these difficulties, the Insurance Act was enacted in the year 1963. The marine insurance covers practically everything, namely, the ships, the fishing vessels, the cargo, the freight, etc., but there are three main categories of such insurance, that is, the cargo, the hull and the freight.
The cargo insurance is generally taken by the owner of the consignment (not necessarily owner of the ship) to protect and saveguard the cargo against sea perils. Such insurance generally cover the risk for damage from pirates, theft, fire, damage due to sea water, storage contamination, jettison, explosion, general average sacrifice, general average contribution, and the like. The cargo insurance may be from port to port, or from warehouse to warehouse depending upon the terms and conditions in the policy.
Hull Insurance covers perils of sea, like, damage to vessel due to rough sea that may be total or partial. This insurance generally covers, unless excluded by the policy, the risks of explosion, fire, collision with any other fixed or floating object, piracy, general average contribution, salvage charges, damage due to bursting of boilers. The cargo insurance is normally confined to the transit period, namely, from port to port or from warehouse to warehouse but the hull policy is generally for one year. It may single vessel insurance or a fleet insurance.
Definition of Marine Insurance
The marine insurance has been defined in Section 3 of the Marine Insurance Act which runs as under:
“ A contract of marine insurance in an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure”
Scope of Marine Insurance
The marine insurance is not confined to maritime peril only. Section 4 of the Marine Insurance Act provides that it may cover a mixed sea and land risk. Sub Section (1) provides that 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 Ireland waters or on any land risk which may be incidently to any sea voyage.
Sub Section (2) provides that where a ship in course of building or the launch of a ship, or any adventure analogous to marine adventure, is covered by a policy in the form of marine policy, the provision of this Act, insofar as applicable, shall apply thereto, but, except by this Section as provided, nothing in this Act shall alter or effect any rule of law capable to any contract of insurance other than a contract of marine insurance as defined by this Act. An explanation has been appended to Section 4 which says that an adventure analogous to a marine adventure includes an adventure where any ship, goods or other movable and exposed to peril incidental to local or inland transit.
The Marine Insurance Act applies only to marine losses and is intended to indemnify the losses caused by marine adventure. However, Section 4 of the said Act provides that a marine insurance, i.e indemnification of losses due to marine adventure, may also cover the mixed risks of sea and land.2 Every law full marine adventure may be the subject of a contract of marine insurance (vide Section 5). The marine insurance is also the insurance of indemnity where the insurer undertakes to indemnify the insured if the goods of the ship is lost in a peril of the sea.
A third party risk in motor vehicle insurance is compulsory by the law, but there is no such compulsion for marine insurance. But, at the same time, the modern trends of trade and seeing the various peril of the sea, the marine insurance is an a matter of fact indispensable. The sender of goods always insist on the insurance if the goods are being sent through a ship.
Classification of marine insurance
The marine insurance could be classified as
(1) Hull Insurance,
(2) Insurance and
(3) Freight Insurance.
(i)Hull Insurance
Literally, hull means body or frame of the ship or vessel and its machinery. Thus, this type of insurance covers ship and its equipments. The ship or vessels may be classified as sea going vessels, sailing vessels, etc. the hull policies may also cover the risk while the vessel is under construction. These insurance are generally for one year.
The complaint company was engaged in the business of drilling oil in Bombay High. The complaint obtained Combine Hull policy/package policy for Rs 52,45,000. An accident took place in which the crane boom got twisted and the bridle line broke as a result. Boom fell on the top of the schlumberger unit. A claim was preferred where the cost of repairs/replacement was estimated to exceed 15 million rupees. A surveyor was deputed.
The complaint company submitted a bill of Rs 80Lakhs which contained air freight charges amounting to Rs 17lakhs as the spare parts were required to be brought by air because it was urgently required. Here was no condition in the policy that air freight would be excluded. The Insurance Company deducted 20lakhs by applying 30% depreciation.
The stand of the Insurance Company was that there was no damage to the hull of the drilling barge covered by the policy, but the damage was only to the crane which is not the hull of drilling barge but only on equipment. The Commission observed that it was difficult to hold that the equipment which was part of the hull could not to be said to be part of the hull. The Commission further observed.
“ It has been rightly pointed out that the property insured is jack up drilling Rig Matdrill which consists of hull and Machinery Of the Drilling
Barge, Hull and Crane cannot be treated as separate items. Crane is an integral part of hull and not equipment. There is nothing on record to hold that the crane is not part of the Hull of the drilling barge…….. In any case, if the term of policy is vague, benefit certainly goes to the insured and not to the insurer.” 8
(ii) Cargo Insurance
Cargo means the goods carried on a ship. Thus , as the term suggests, cargo insurance is taken in respect of the cargo carried by the ship from one place to another. The cargo insurance policy may be a ‘time policy’ or ‘voyage policy’. When the policy is for a definite period, it is known as ‘time policy’ and if its for a particular voyage it is known as ‘voyage policy’ and there is no time limit. S
(iii) Freight Insurance
The freight is the rent or amount paid for the transportation of cargo. Generally the ship owner and the person receiving is one person. The freight could be paid in advance or at the destination. Under the marine law the freight could be paid only if the cargo reaches safely at the destination port.
Therefore, if the freight has been paid in advance , it poses no difficulty, but the problem sometime arises when the freight is payable at the destination port and the cargo may got lost during the voyage and could not reach destination. In that event freight is lost. In order to overcome such contingency, the freight insurance is taken. However, if the freight has been paid in advance it cannot be recovered in case the cargo is lost during the voyage (sec 14 of the Marine Insurance).