Losses in the marine insurance business are the result of the various perils. Marine insurance policy does not necessarily cover all the risks.
The insurer is liable to indemnify an insured in respect of only losses which result from perils insured against.
When the loss occurred is beyond the insured peril, the insured himself shall have to bear.
The onus of proof under a policy of Marine insurance is upon the insured to establish that the loss was proximate, caused by an insured peril.
When goods are insured against ‘All Risks’, the onus of proof of loss is transferred to the insurer.
The perils insured against are mentioned in the policy and the underwriter shall be liable for damages caused by the insured perils.
“Marine 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 (enemies), pirates, rovers, thieves, captures, seizures, restraints and detainment of princes and peoples, jettisons, barratry and other perils, either of the like kind or which may be designated by the policy.”
12 Marine Perils are;
- Perils of Sea
- Pirates, Rovers, Thieves
- Restraints and Detainments
- The Free of Capture and Seizure Clause (F.C. & S. Clause)
- Strikes, Riots and Civil Commotion Clause
- All Other Perils
Let’s look at the following marine perils;
1. Perils of Sea
Under the perils of the sea, the ordinary action of the winds and waves, ordinary wear, and tear to the vessel, the inherent risk of the cargo is not included.
The underwriter may be liable for losses caused by Perils of the sea; he is not necessarily liable for perils on the sea.
Perils of the sea refer to fortuitous accidents or casualties of the sea. If the loss arising out of any of the perils of the sea insured is attributable to the fraud or willful misconduct of the assured, the underwriter is acquitted from the liability under the policy.
In olden times fire was the biggest maritime perils, but recently it has been under control to a greater extent. Damage resulting from fire and smoke is included under fire-peril.
The water used for extinguishing fire may cause damage to the insured goods.
So, this peril is also insurable. The damage due to spontaneous combustion may be maritime peril and be insured against.
Damage was done due to lightning, explosion and fire originating from the negligence of the crew are recoverable from underwriters.
The losses which are not included in the standard policy can be covered by having special clauses and paying extra-premium.
Related: What is Fire Insurance?
This is die vessel which is authorized by nations for the purpose of defense or attack in the event of hostilities.
Any damage to the goods or ships arising out of collision against a man-of-war is insurable.
Tile ships belonging to the foe (enemy) may cause loss to the insured and is re-underwritten by the marine policy.
This policy extends to all the persons of the enemy country and to their hostile acts provided such acts form part of the enemy actions.
5. Pirates, Rovers, Thieves
The perils on account of pirates, rovers, and thieves were common in olden times, but it has been reduced considerably these days.
These acts are generally committed for the pursuit of individual gain by the persons beyond the jurisdiction of a state.
The term ‘thieves’ does not mean clandestine theft or a theft committed by any one of the crew or officers or passengers.
Jettison means voluntary throwing away of the cargo or part of a vessel’s equipment for the lightening or relieving the ship for common safety.
- The aim of the intentional throwing away of the goods or property is to relieve the vessel from some imminent peril.
- The accidental falling of things does not constitute jettison.
- Own inherent-vice of cargo is also not included in the jettison.
Barratry includes every wrongful act willfully committed by the master or crew the prejudice of the owner. The act of barratry must be committed without the knowledge of the owner.
The theft, the setting fire to ship, fraudulent selling of vessel and cargo without the connivance of the ship-owner are the various examples of the barratry. The insurer, if barratry insured, is liable for losses arising out of barratry.
8. Restraints and Detainments
The preventions free use of a port by the government of the country is called restraints. It may cause interruption and possible loss of voyages involving such ports and sacrifice of cargo.
The term ‘detainments’ covers losses resulting from the detention of a vessel and its cargo by blockage or possibly quarantine regulation or other interference by the police power of a nation while a vessel is in port.
It does not cover losses which are the result merely of delay or interruption of the voyage, or loss of market or some other remote result.
9. The Free of Capture and Seizure Clause (F.C. & S. Clause)
The policy generally covers war perils. But, to include perils of the sudden declaration of war, the war clause or free of capture and seizure clause is added to relieve war perils.
By deletion of this clause, the policy is automatically restored to its original condition and adequate premiums are charged for the purpose.
The risk of the explosion has greatly increased. The explosion on board of a vessel damaging hull or cargo or both could be constructed as a peril on the sea. An explosion on shore might damage a ship or its cargo.
Marine cargo policies were amended to include the risk of explosions not clearly caused by war perils. The explosion, in case of hull policies, ‘on shipboard or elsewhere’ is covered in the amended “Inchmaree or Negligence clause”.
11. Strikes, Riots and Civil Commotion Clause
The marine insurance on cargo is extended to cover from warehouse to warehouse or otherwise insures the goods on shore prior to shipment and after discharge; the danger of underwriters being held liable for losses, resulting from the unlawful acts of strikers from riots or civil commotions is materially enhanced.
The insurers are unwilling to assume liability for losses due to unlawful acts.
12. All Other Perils
The loss occurred by the salt water of the sea, action of worms on timber, cattle dying due to wanting of fodder as a result of lengthy voyage constitute sea perils.
There may be other damages due to oil, sweat, heat, which are insured under other perils.