MARINE INSURANCEIntroduction of the subject:
Importance of Marine insurance in commerce; Marine insurance plays a very important role in the field of overseas commerce and internal trade of a country. It is closely linked with Banking and Shipping. Banks generally finance the goods which are transported by ships or by other means of transport in the case of internal trade and Marine Insurance protects such goods against loss or damage. Without such protection the entire trade structure is bound to suffer.
Marine Insurance can be divided broadly into two groups
o Cargo Insurance
o Hull Insurance
As stated earlier, Marine Insurance is closely linked up with the trade of a country internal as well as international. A sale contract which is an essential feature in the trade involves a seller and a buyer, apart from the other parties like the carrier, the bank, and the clearing agent. Whether the insurance of the goods in transits is to be the responsibility of the seller or the buyer depends on the type of the sale contract in any transaction. There are different types of sales contracts the most important of which, as affecting the Marine Insurance are
F.O.B. ( Free on Board) In this case, the seller is responsible for loss of or damage to the goods until they are placed on board the steamer for on carriage. Thereafter the buyer becomes responsible and he has, therefore, the option to insure where he likes.
C.I.F. (Cost, Insurance and Freight) In this case the seller assumes responsibility for the insurance and the insurance charges are indicated in the invoice along with the other charges.
C & F (Cost and Freight) In this case, normally the buyers responsibility attaches from the time the goods are placed on board the vessel and he has therefore to take care of the insurance.
F.O.R. (Free on Rail) This is same as F.O.B. but it concerns mainly the internal trade transactions.
Marine Cargo Policy:
This policy covers goods, freight and other interests against loss or damage to goods whilst being transported by rail, road, sea and/or air.
• This policy covers goods, freight and other interests against loss or damage to goods whilst being transported by rail, road, sea and/or air.
• Different policies are available depending on the type of coverage required ranging from an ALL RISK cover to a restricted FIRE RISK ONLY cover.
Transportation of goods can be broadly classified into three categories: i. Inland Transport
ii. Import iii. Export
The types of policies issued to cover these transits are: For Inland Transit
a. Specific Policy - For covering a specific single transit
b. Open Policy -For covering transit of regular consignments over the same route. The
policy can be taken for an amount equivalent to three months despatches and premium paid in advance. As each consignment is despatched, a declaration giving details of the despatch including GR/RR No. is to be sent to the insurer and the sum insured gets reduced by the amount of the declared despatch. The sum insured can be increased any number of times during the policy period of one year; but care should be taken to ensure that adequate sum insured is available to cover the consignment to be despatched.
c. Special Declaration Policy - For covering inland transit of goods wherein the value
of goods transported during one year exceeds Rs.2 crores.Although the premium for the estimated annual turnover [i.e. the estimated value of goods likely to be transported during the year] has to be paid in advance, attractive discounts in premium are available.
d. Multi-transit Policy - For covering multiple transits of the same consignment
including intermediate storage and processing. For e.g. covering goods from raw material supplier's warehouse to final distributor’s godown of final product.
a. Specific Policy - For covering a specific import/export consignment.
b. Open cover - This policy which is issued for a policy period of one year indicates
the rates, terms and conditions agreed upon by the insured and insurer to cover the consignments to be imported or exported. A declaration is to be made to the insurance company as and when a consignment is to be sent along with the premium at the agreed rate. The insurance co. will then issue a certificate covering the declared consignment.
c. Custom duty cover - This policy covers loss of custom duty paid in case goods
arrive in damaged condition. This policy can be taken even if the overseas transit has been covered by an insurance company abroad, but it has to be taken before the goods arrive in India.
Add on covers
Inland transit policies can be extended to cover the following perils on payment of additional premium :
i. SRCC - Strike, riot and civil commotion (including terrorist act)
they are loaded on board the vessel, this extension can be taken.
Export /Import policies can be extended to cover War and /or SRCC perils on payment of an additional premium.
Who can take the policy
The contract of sale would determine who buys the policy. The most common contracts are:
• FOB (Free on Board)
• C & F (Cost & Freight)
• CIF (Cost, Insurance & Freight)
In FOB AND C&F contracts, the buyer is responsible for insurance. Whereas in CIF contracts the seller is responsible for insurance from his own premises to that of the purchaser.
How to select the sum insured
The sum insured or value of the policy would depend upon the type of contract. Usually, in addition to the contract value 10/15% is added to take care of incidental cost.
How to claim
The following steps should be taken by the insured in event of a loss or damage to goods insured :
i. Take immediate steps to minimise loss.
ii. Inform nearest office of the insurance company or claim settling agent mentioned on the policy.
iii. In case of damage to goods whilst on ship or port, arrange for joint ship survey or port survey.
iv. Lodge monetary claim with carrier within stipulated time period.
v. Submit duly assigned insurance policy/certificate along with the original invoice and other documents required to substantiate the claim such as :
a. Bill of Lading / AWB/GR b. Packing list
c. Copies of correspondence exchanged with carriers.
d. Copy of notice served on carriers along with acknowledgment/receipt. e. Shortage/Damage Certificate issued by carriers.
vi. Survey fees are to be paid to the surveyor appointed by the insurance company. These fees will be reimbursed along with the claim if the claim is otherwise admissible.
vii. Survey report submitted by Surveyor.
A. Claim form containing the following information. a. Date, time, cause and circumstance of the loss. b. Details of damaged property.
c. Amount of loss claimed.
d. Sound value of the goods at the time of Loss. e. Other insurance, if any.
B. Letter lodging monetary claim with carrier within stipulated time period. C. Payment details of premium amount paid
D. Insurance policy/certificate along with the original invoice. E. Bill of Lading / AWB/R R/L R.
F. Stores Receipt Note G. Packing list.
H. Copies of correspondence exchanged with carriers.
I. Copy of notice served on carriers along with acknowledgment/receipt. J. Shortage/Damage Certificate issued by carriers.
K. Survey Report is very important where claim amount is over Rs.20,000/- as per provisions of the Insurance Act.1938.
L. Discharge voucher.
M. Letter of Undertaking where applicable.
N.B. Waiver of requirement of any claim documents can be made on the merit of each claim case by the claim sanctioning authority with the approval of the Head of the Department.
Marine Hull Policy
What is covered?
All types of Ocean-going vessels
All type of Coastal/Inland vessels
Yard and pleasure Crafts
Shipbuilding- construction of vessel
Ship Repairers' Liabilities
Breaches of warranties / voyage cover
Freight- at -Risks insurance for voyages
Fishing vessels / Trawlers
Jetties (with or without cranes), fixed pontoons/Pontoons Jetties, wharves etc.
SCOPE OF INSURANCE COVER :
All risks relating to Vessels, Floating Dry Docks, Jetties and Shipowners' Interests including Hull & Machinery (H&M), Freight, Disbursements, Increased Value, Premium Reducing, Excess Liabilities, Protection and Indemnity (P&I) Liabilities, Charterers' Liabilities, Charterers' Freight, Charterers' Hire and/or Disbursments, General Average Disbursments, Ship Repairers' Liabilities, Shipbuilding Risks, Shipbreaking Risks and other allied interests of whatsoever nature required to be insured in India.
Perils / Risks
(A) The policy covers perils of the seas, rivers, lakes or other navigable waters loss/damage to the property insured caused by :
Stranding, sinking etc.
Overturning, derailment ( of land conveyance )
Violent theft by persons outside the vessel.
General average sacrifice, sacrifice, salvage charges
Breakdown of or accident to nuclear installations or reactors
Contact with aircraft or similar objects, or objects falling there from, land conveyance, dock or harbour equipment or installation.
Earthquake volcanic eruption or lightning.
The policy does not cover loss/ damage due to :
Deliberate damage/destruction of the vessel by wrongful act of any person
Use of any weapon of war employing atomic / nuclear fission and or fusion.
Radioactive Contamination, Chemical, Biochemical, Biological, Electromagnetic Weapons.
Insolvency or financial default of the vessel owner /operators /charterers
War / civil war, Strike, Riot or Civil Commotion
Any terrorist or person/s acting with political motive
CLAIM INTIMATION AND STEPS TO BE TAKEN BY OWNERS:
In the event of casualty likely to give rise to a claim - Immediate notice to policy issuing office.
- Giving brief details as to name of vessel, place of occurrence, date & time of casualty, circumstances leading to incident.
- In case of theft please notify police.
- In case of fire assistance of fire brigade to extinguish fire.
- Appointment of adjuster in case of Oceangoing Vessels where necessary. - All steps to minimise loss as prudent uninsured.
DOCUMENTS ESSENTIAL :
Key Documents required for settlement of Marine Hull Insurance Claim. A. Claim form containing the following information.
a. Date, time, cause and circumstance of the loss. b. Details of damaged/loss vessel.
c. Amount of loss claimed. d. Other insurance, if any.
B. Certified copy of note of protest by master. C. Payment details of premium amount paid. D. Insured's report on occurrence.
E. Survey Report is very important where claim amount is over Rs.20,000/- as per provisions of the Insurance Act.1938.
F. Original Repair Bill, cash memo, Invoices.
G. Weather Report by Meteorological Dept if available. H. Affidavits filed by rescue vessels.
I. Certificate of survey for inland vessels. J. Registry certificate.
K. Notarized statements of master of the vessel. L. Log Book extracts (Engine & Deck )
M. Crew list with details of competency certificates. N. Copy of Claim bill with supporting documents. O. V.R.C. cancellation certificate
P. Death certificate of crew for P.A. claim Q. Post mortem report of crew for P.A. claim
R. Disability Certificate from Doctor of crew for P.A. claim S. Legal heir Certificate of crew for P.A. claim
T. Letter of Undertaking where applicable.