Important Conditions in Marine Policy

Prof. Isha Jaiswal

IntroductionA marine insurance is entirely based on conditions. To

make the standard policy suitable for the different types of contracts some appropriate suitable conditions are added to the policy. The conditions are inserted in the policy in the form of clauses. A marine insurance policy may have a number of clauses. These clauses may be general for all types of policies, or may be special to cover certain agreed points. A policy should cover all types of things so that it may avoid misunderstanding or avoid disputes at a later stage.

Conditions/Clauses in a Marine Policy There are mainly three types of clauses in marine

policy:1. Hull Clauses2. Cargo Clauses3. Freight clauses

Hull ClausesThese clauses are especially framed with the insurance

on vessels and are inserted in hull policies. These framed clauses may be pertaining losses caused from the events such as collision, standing, general average etc.

Cargo ClausesThese clauses are used in the insurance of goods or

subject matter and they are incorporated in cargo policies. These clauses give the description of the nature, extent and the scope of the cargo insurance. They define the precise conditions and restrictions or constraints. Some additional marine perils against which cover may be sought or which may be excluded from the policies are inserted through special clauses.

Freight clausesThe clauses are framed with reference to the loss of

freight due to perils which may be insured for a period for a voyage.

Other Conditions/Clauses in a Marine Policy

1. Assignment Clause2. ‘At and From’ Clause3. Deviation or Change of Voyage 4. Inchmaree Clause5. Sue and Labor Clause6. Memorandum Clause7. Perils of the Sea clause8. All Risks Clause9. FCS Clause10. Bottamary Bond11. Lost or Not Lost clause12. Warehouse to Warehouse Clause13. Touch and Stay Clause14. Running Down Clause15. Reinsurance Clause16. Continuation Clause17. Warier Clause18. FGA Clause19. FPA Clause20. Repodentia Bond

Assignment ClauseThis clause makes it clear that the marine policy is

assignable unless it contains terms specially prohibiting assignment and may be assigned before or after a loss. The assignee who has acquired the beneficial interest in the policy is entitled to sue thereon in his own name, and the dependent is entitled to sue thereon in his own name, and the dependent is entitled to make any defense arising out of the contract which have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

‘At and From’ Clause

This clause refers to the time when risk commences. According to this clause the risk coverage starts when the ship is lying at the port of its departure and from the time it leaves the port. If insurance policy states the words, ‘at and from Madras’, it means the risk is covered when the ship is at Madras port and also when it leaves this port. This clause applies to Hull and Freight Insurance.

Deviation or Change of Voyage

The details of the voyage are mentioned in the policy. The ports of departure and arrival are mentioned in the policy. The route to be followed by the ship is also given. In case of any deviation, the insurer will be relieved of his liability. If the ship changes its original route and follows same route later on, it will be taken as deviation. The insurer will not be liable to indemnify the loss if the original route is changed.

Inchmaree clauseUnder this clause any loss caused by the negligence of

the master or a crew member is also covered. The damage caused to the cargo in loading and unloading operations is also recoverable. This clause was inserted after a famous case involving a ship named ‘Inchmare’ in 1857. This clause also covers the loss by explosives or latent defect in the machinery or the hull.

Sue and Labor Clause

This clause enables the insured and the insurer in trying to save the subject- matter of insurance from any type of loss. If the insured spends some money in an attempt to save the goods from an impending loss, he can recover this amount from the insurer. The act of saving the subject-matter on minimizing loss does not amount to deviation and the contract will not be void.

Memorandum Clause

Sometimes perishable goods are the subject-matter of insurance. The memorandum clause is used to save the insurer from paying small losses of perishable goods. Under this clause the insurer is not liable for partial losses. In certain commodities this loss is allowed up to 50%. However, if there is a general loss, the insurer will be liable to pay the loss.

Perils of the Sea ClauseThis clause is applicable only to fortuitous accidents or

casualties of the seas. It does not include the ordinary action of the winds or waves.

All Risks ClauseThis clause provides that the insurance is against all

risks of loss or damage to the subject matter, insured and that the claims are payable irrespective of percentage.

FCS ClauseThis clause is related to free of capture and attack. This

clause is generally inserted in times of war, it means that the insurers will not be liable for loss or claim arising from attack of ship as a price of war. In times of war this clause is inserted unless the insured pays the underwriter additional premium for war risks.

Bottomary BondFor certain urgent expenses such as

repairing of the ship some loan is to be gained from some resource. This loan is given in the form of a bond with an understanding that it will be repaid within a period of certain number of days after the arrival of the ship at the destination.

Lost or Not Lost ClauseThis clause was commonly used in the days before the

internet communication was not available. The insured takes a marine policy to cover the risk of some subject matter. Suppose the goods is send by sea-route not received by the party then that party contacts and intimates the non-receipt of the goods. The sender does not know what has happened to the goods (whether lost or not). Under such circumstances this clause provides the cover for the loss of the goods.

Warehouse to Warehouse Clause

This clause covers the risk from the warehouse of the shipper or consignor to the warehouse at the destination. The risk of taking goods to the port from sender’s warehouse to the arrival of goods at the receiver’s warehouse is covered. This clause saves the shipper from lot of troubles and he is sure of the safe arrival of the subject matter not only at the port but also at the warehouse.

Touch and Stay Clause

The ship should go and stay only at those ports which are mentioned in the policy. In case the ports are not mentioned, then the ship should take the usual route and stay at the port coming on that route only. If the ship goes to any other port, it will amount to deviation. The calling at ports must be for justifiable reasons.

Running down ClauseThis clause is also called as collision clause and is

included in hull policies. This clause covers the risk arising out of collision between two ships. The insurer is liable to pay compensation to the owner of the damaged ship.

Reinsurance ClauseIf the policy has been previously taken and if after sometimes

the policy is to be reinsured then the reinsurance clause as under is simply added on the original policy.

“Being a reinsurance and subject to the same clauses and conditions as the original policy, and to pay as may be paid thereon.”

The reinsurer is liable only to original insurer. As insured has no direct bearing with the reinsurer, he cannot approach for the settlement of the claim to the reinsurer.

Continuation ClauseThis clause authorizes the vessel to continue and

complete her voyage even if the time of the policy has expired. This clause is used in a time policy. The insured has to give prior notice for this and deposit a monthly prorate premium.

Warier Clause

The clause states that any act of the insured or the insurer to protect, recover or preserve the subject matter of insurance shall not be taken to mean that the insured wants to forgo the compensation, nor will it mean that the insurer accepts the act as rejection of the policy.

FGA ClauseForeign General Average clause means that

the arrangement in case of a general average claims, which may arise under the policy, the average settlement made in a foreign country will be adopted as the basis for settlement.

F.P.A. and F.A.A. ClauseThe F.P.A. (Free of Particular Average) clause relieves

the insurer from particular average liability. The F.A.A. ( free of all average) clause relieves the insurer from liability arising from both particular average and general average.

Respondentia Bond

Similar to bottomary bond, this respondentia bond also represents a monetary loan borrowed by the master of a ship to meet certain urgent expenses. The loan is raised on the security of the cargo only. This loan is to be repaid within a certain number of days after the arrival of the cargo at the destination as specified in the respondentia bond. If the cargo at the destination as specified in the respondia bond. If the cargo is lost on its way, the lender loses his money.