All About Marine Insurance Act,1963 By Naman Khanna

Ans. A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses the losses incidental to marine adventure.[1]

Q2. What is Lawful Marine Adventure?

Ans. Every lawful marine adventure may be the subject of a contract of marine insurance.[2] “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.[3]

Q3. What is a Contract of Marine Insurance?

Ans. A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses the losses incident to marine adventure.

Q4. What are the elements of a Contract of Marine Insurance?

Ans. Its basic elements include those what are the essentials of every contract-:

Proposal- The insurance applicant at the time of approaching the company prepares a slip accompanied by other documents which is considered the proposal.
Acceptance- The insurer accepts the slip and agrees to issue a marine insurance policy forming a big part of the legal contract.
Consideration- The premium is the consideration and is paid at the time of the contract.
Policy Issuance- The insurer issues the policy after the premium is paid.
Insurable Interest- Dealt with in questions below.
Warranties- Warranties are those statements by which the policyholder promises to fulfil or not to fulfil certain conditions.
Other Important aspects- The contract must be based on principle of Utmost Good Faith as well as Doctrine of Subrogation (Policyholder should not get more than actual loss or damage).

Q5. What are Mixed Sea and Land Risks?

Ans. A contract of marine insurance may, by its express terms, or by usage of trade, be extended to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. 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.[4]

Q6. What are the requirements of taking a Marine Insurance Policy?

Contract of Insurance.
Contract includes an insurable interest in the subject matter having some value.
It is not a contract by way of wagering.
Policy must be following provisions under the Act.[5]

Section 6 of Marine Insurance Act, 1963-:

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 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”, or subject to any other like term: Provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer.

Q7. What is Insurable Interest?

Ans. (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.[6]

The Act declares all marine insurance policies as void where insurable interest doesn’t apply at the time of loss.

The “quintessence” of interest is that-:

There should be a physical object exposed to the sea hazards and dangers.
The assured should stand in some relationship to that object, in consequence of which he benefits by its preservation or is prejudiced by its loss.[7]
Insured, thus must stand in a legal relationship to the property.[8]
This Act doesn’t give an exhaustive definition nor is it possible to give an exhaustive definition of “insurable interest”.[9]

Q8. What is Attachment of Interest or Where the interest must attach?

Ans. (1) The assured must be interested in the subject-matter 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.[10]

Q9. What are some cases of Insurable Interest?

Defeasible or contingent interest. — 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 seller’s risk, by reason of the latter’s delay in making delivery or otherwise.[11]
Partial interest. —A partial interest of any nature is insurable.[12]
—The lender of money on bottomry or respond entia has an insurable interest in respect of the loan.[13]
Master’s and seamen’s wages. —The master or any member of the crew of a ship has an insurable interest in respect of his wages.[14]
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.[15]

Q10. What is “Assignment of Interest”?

Ans. 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.[16]

Q11. What are some terms used in marine insurance to explain damage or loss?

L. V. O. (Total Loss of Vessels Only): This is the minimal coverage package in marine insurance, which covers only the loss of cargo resulting from total loss of vessels.
L. O. (Total Loss Only): This covers the total loss of insured cargo whether the total vessel is lost.
P. A. (Free of Particular or Average): This is in similar to General Average i.e. this covers the risk of loss due to the voluntary sacrifice of ships or its materials due to the perils of the sea.
A (With Average): This covers risk against stranded, fire, collisions and sunk. Here the insurance company pays all the damage incurred fully.

Q12. How is the Insurance Valued?

Ans. 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. 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.

(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 subject-matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance.[17]

A voyage policy on goods is an insurance of the adventure, as well as an insurance on the goods themselves.[18]

Q13. Should the contract be embodied in policy?

Ans. A contract of marine insurance shall not be admitted in evidence unless it is embodied in a marine policy in accordance with this Act. The policy may be executed and issued either at the time when the contract is concluded, or afterwards.[19]

Q14. What are the essentials of a marine policy?

Ans. According to Section 25 of Marine Insurance Act, 1963, a marine policy must include-:

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 or names of the insurer or insurers.

Q15. What are the conditions regarding designation and subject matter of the marine policy?

Ans. (1) The subject-matter insured must be designated in a marine policy with reasonable certainty.

(2) The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.

(3) Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.

(4) In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured.[20]

Q16. What is Double Insurance?

Ans. According to Section 34 of Marine Insurance Act, 1963-:

1) Where two or more policies are affected 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;

(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.

Q17. What are the Rights of the Insurer on Payment?

Ans. The Marine Insurance Act provides for three rights to an insurer-:

Right of Subrogation- The right of subrogation is a necessary incident of a contract of indemnity, and, speaking broadly, the insurer in the absence of special contract, must exercise all remedies arising from subrogation in the name of the assured. An underwriter is entitled only to the rights of the assured in respect of the subject matter insured, in so far as he has indemnified the assured.[21]
Right of contribution. —

(1) Where the assured is over-insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract.

(2) If any insurer pays more than his proportion of the loss, he is entitled to maintain a suit for contribution against the other insurers and is entitled to the like remedies as a surety who has paid more than his proportion of the debt.[22]

Right of Under Insurance- The insurer is not liable to the assured for any sum in excess of the amount actually insured, and thus in a case of under insurance it is the assured who himself will be the insurer for the balance amount.[23]

Marine Insurance Act, 1963.

[1] Section 3, Marine Insurance Act, 1963.

[2] Section 5, Marine Insurance Act, 1963.

[3] Section 4, Marine Insurance Act, 1963.

[4] Section 4, Marine Insurance Act, 1963.

[5] Section 24 – 34 of Marine Insurance Act, 1963.

[6] Section 7 of Marine Insurance Act, 1963.

[7] Macaura v. Northern Assurance (1925) A.C. 619, 627 H.L.

[8] Lucena v. Crauford, (1806) 2 Bos. & P. (N.R.) 269

[9] Seagrave v. Union Marine, (1866) L.R. 1 C.P. 305

[10] Section 8 of Marine Insurance Act, 1963.

[11] Section 9 of Marine Insurance Act, 1963.

[12] Section 10 of Marine Insurance Act, 1963.

[13] Section 12 of Marine Insurance Act, 1963.

[14] Section 13 of Marine Insurance Act, 1963.

[15] Section 14 of Marine Insurance Act, 1963.

[16] Section 17 of Marine Insurance Act, 1963.

[17] Section 18 of Marine Insurance Act, 1963.

[18] British & Foreign Marine Insurance Co. v. Sanday, (1916) 1 A.C. 650, 672 H.L. (per Lord Wrenbury).

[19] Section 24 of Marine Insurance Act, 1963.

[20] Section 28 of Marine Insurance Act, 1963.

[21] Section 79 of Marine Insurance Act, 1963.

[22] Section 80 of Marine Insurance Act, 1963.

[23] Section 81 of Marine Insurance Act, 1963.