An insured person will have insurable interest in the subject-matter where he stands in any legal or equitable relation to the subject-matter in such a way that 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.
Since marine insurance is frequently affected before the commercial transactions to which they apply are formally completed it is not essential for the assured to have an insurable interest at the time of effecting insurance, though he should have an expectation of acquiring such an interest.
If he fails to acquire insurable interest in due course, he does not become entitled to indemnification.
Since the ownership and other interest of the subject matter often change from hands to hands, the requirement of the insurable interest to be present only at the time of loss this makes a marine insurance policy freely assignable.
There are two exceptions of the rule in marine insurance;Lost or Not Lost and P.P.I. Policies.
Lost or Not Lost
A person can also purchase policy in the subject-matter in which it was known whether the matters were lost not lost, in such cues the assured and the underwriter are ignorant about the safety or otherwise of the goods and complete reliance was placed on the principle of Good Faith.
The policy terminated if anyone of the two parties was aware of the fact of loss, in this case, therefore, the insurable interest may not be present at the time of contract because the subject-matter would have been lost.
The subject-matter can be insured in the usual manner by P.P.I. (Policy Proof of Interest), i.e., interest proof policies. It means that in the event of claim underwriters may dispense with all proof of insurable interest.
In this case if the underwriter does not pay the claims, it cannot be enforced in any court of law because P.P.I. policies are equally void and unenforceable.
But the underwriters are generally adhering on the terms and pay the amount of claim.
The insurable interest in marine insurance can be of the following forms:
According to Ownership
The owner has insurable interest up to the Rill value of the subject-matter. The owners are of different types according to the subject-matter.
- In Case of Ships: The ship-owner or any person who has purchased it on charter-basis can insure the ship up to its full price.
- In Case of Cargo: The cargo-owner can purchase policy up to the full price of the cargo. If he has paid the freight in advance, he can lake the policy for the full price of the goods plus amount of freight plus the expense of insurance.
- In Case of Freight: The receiver of the freight can insure up to the amount of freight to be received by him.
Insurable Interest in Re-insurance
The underwriter under a contract of marine insurance has an insurable interest in his risk, and may re-insure in respect of it.
Insurable Interest in other Cases
In this case all those underwriters are included who have insurable interest in the salary arid own liabilities.
For example, the master or any member of the crew of a ship has insurable interest in respect of his wages.
The lender of money on bottomry or respondentia has insurable interest in respect of the loan.