Contract of Marine Insurance: Types, Coverage, Exclusions and Dispute Mechanism.

INTRODUCTION 

Marine insurance is one of the world's oldest type of insurance. In the age of globalisation, maritime transportation has been the backbone of international trade, accounting for more than 80% of all cargo transportation. However, marine shipping poses a significant risk to both the items being transported and the ship transporting them. As a result, they should be insured in order to allow trade and commerce and to reduce the danger of financial damage to property, as it provides security and protection to individuals, communities, and enterprises. It stimulates businessmen to develop and engage in more risky ventures, which ensures a higher level of economic activity in the country. As a result, marine insurance is an essential component of international trade and business. India's marine insurance laws are governed by the Marine Insurance Act 1963.

The existence of a maritime insurance contract can be dated back centuries. It is the ‘earliest authenticated insurance contract' demonstrating the characteristics of insurance in terms of risk transfer owing to any unavoidable incident in place of any payment of premium. The first mention of insurance was in the form of ‘bottomry,' a monetary payment that protects traders from debt if goods are lost or destroyed. 

Even during the Aryan period, there existed signs of something resembling marine insurance in India. However, marine insurance, as it is known in the civilised world today, originated exclusively in England. Between 1797 and 1810, seven marine insurance firms were established in Calcutta, none of which still exist today. Later, mostly composite offices were established.

The early monopoly and then rising rates of duty levied on British offices enticed them to establish independent offices throughout the commonwealth's colonies, including India, and therefore the British offices had enormous influence in the Indian insurance market. The rules of English law were applied with little variation in India in order to adapt them to Indian situations. The Indian Maritime Insurance Act 1963, which is a replica of the English Marine Insurance Act 1906, governs marine insurance today.

In the era of globalization, maritime transport plays an essential part in promoting trade and commerce. Shipping high-value items by water is one of the most cost-effective means of transportation. It is the backbone of international trade, carrying the majority of the world's merchandise commerce by volume. However, because marine transport entails a higher level of risk due to perils of the sea, it is critical that the parties are appropriately protected by insurance arrangements.

Marine insurance has become an important component of international trade and commerce since it aids in limiting the risks involved with financial loss to the ship, commodities, or other moveable in maritime transportation.

MARINE INSURANCE CONTRACT 

According to Section 3 of the Marine Insurance Act of 1963, maritime insurance is defined as an arrangement in which the insurer agrees to indemnify the assured against marine losses, that is, losses incidental to marine adventure, in the manner and at the extent agreed upon.

The nature of marine insurance is fundamentally an indemnity contract, which means that the insurance company is only accountable for the actual loss or damages incurred by the insured. The insurer, on the other hand, cannot be held accountable for each and every loss. The loss of insurable property must occur as a result of a maritime peril, according to the Act.

MARITIME PERILS 

Maritime perils is defined in Section 2(e) of the Marine Insurance Act. Maritime perils, often known as perils of the sea, are unusual forces of nature that maritime endeavours may encounter on their voyage. It covers any mishaps or casualties that occur throughout the voyage as a result of an act of God with no human interference. Sections 55 to 58 of the Marine Insurance Act of 1963 clearly define some of the circumstances that apply to losses caused by marine perils. 

Examples of ‘The Perils of the Sea' include shipwreck, stranding, and collision.

REQUIREMENTS FOR CLAIMING MARINE INSURANCE

The first requirement is the presence of maritime peril, which is a prerequisite for claiming loss or damage. The guaranteed must also have insurable interest, which is the second necessary requirement for claiming loss. Section 7 of the Act defines the term insurable interest. In the context of maritime insurance, the fundamental principle of insurable interest is that insurance cannot be issued against injury to property in which the insured has no interest.

Once the aforementioned essential conditions are met, the insured has the right to sue the insurer for the losses sustained.

INSURABLE INTEREST 

The Marine Insurance Act declares all marine insurance policies null and void where insurable interest does not exist at the time of loss.

The core of “interest” is that

a) there should be a physical object exposed to maritime perils, and 
b) the assured should have some legal relationship to that object, as a result of which he either benefits from its maintenance, or is injured by its loss or mishap.

The Indian Act makes no claim to provide an exhaustive definition of "insurable interest." It is also impossible to define the term "insurable interest" entirely, but the general rule is that to constitute "interest" insurable against a risk, there must be an interest such that the risk would cause damage to the guaranteed via its proximate consequence.

WHAT IS NOT COVERED UNDER MARINE INSURANCE 

Loss or damages that occur in the usual course of nature or as a result of one's own fault are not included in the category of maritime risks under the  Act.

Loss, damage or expense attributed to willful misconduct or volume/ordinary wear and tear of the insured goods, any loss caused by delay, breakage, inherent vice or nature of the subject matter insured, or any loss caused by rats or vermin, or any injury to machine not caused by maritime perils

TYPES OF MARINE INSURANCE CONTRACTS

Hull Insurance: This type of insurance often covers the loss caused by damage and destruction to the owner's water-borne ship vessel.The insurance covers the ship's articles, including but not limited to furniture and other automated parts.The owner is compensated for losses and disasters that occur during the normal course of business.

Cargo Insurance: Cargo insurance protects products from physical damage or loss while in transit by sea.It is taken by the owner of the goods to be shipped by sea.If the shipment is damaged, the owner receives compensation from the insurance company.

Freight Insurance:The money paid to the ship's owner is referred to as freight.Freight insurance covers the movement of goods from one port to another. It protects against any losses to the shipment during transit.This sort of maritime insurance also covers cargo losses caused by ship collisions.

Liability Insurance:Liability insurance is when an insurer agrees to indemnify an insured for losses incurred as a result of liability to a third party, such as those incurred as a result of a ship collision or other similar risks.

DISPUTE RESOLUTION MECHANISM

Marine insurance disputes can be litigated in India's Civil and Consumer Courts, which have the necessary territorial and pecuniary jurisdiction.However, if the marine insurance policy contains an arbitration clause, the issue must be resolved through arbitration.

CASE LAW

Consort Shipping Line Ltd vs FAI Insurance (FIJI) Ltd

The plaintiff's vessels were insured by the defendant under a normal marine hull policy.The policy featured a mandatory provision requiring any disagreements to be resolved by an arbitrator.The insured, unaware of the provision, filed a writ seeking damages for the sinking of his two vessels.When the insured obtained a copy of the policy, he requested a stay of proceedings so that the matter may be sent to arbitration.The insurer contended that because the insured had initiated legal procedures, the court could not be convinced that the plaintiff was prepared to go to Arbitration as required by the Arbitration Act.

DECISION: Matter stayed and referred to Arbitration

HELD: The insured's right to arbitration had not been waived.In fact, the insurance policy required that any waiver or adjustment of rights be agreed to in writing.Furthermore, the filing of an action does not necessarily imply a lack of readiness and willingness to submit to arbitration.

CONCLUSION

The sea has played a significant significant role in the world trade industry.With the rise of global trade and industry, marine insurance has become a secure refuge for shipping companies and transporters.When unexpected problems or contingencies emerge, ship owners and merchants operating in the shipping business benefit greatly from marine insurance.It aids in the reduction of financial loss of valuable cargo during transportation via inland waters or sea, and eventually protects businesses from the risks of the sea.

The national legal regimes govern maritime insurance.The Maritime Insurance Act, 1963, regulates numerous areas of marine insurance in India. The existence of diverse national legal regimes in the conduct of maritime insurance business has various implications for the contracting parties, particularly the assured, who will have trouble understanding the coverage of the foreign insurance market.Without homogeneity in national marine insurance legal frameworks, the international conduct of maritime insurance would be significantly hampered, particularly from the standpoint of the assureds.As a result of the worldwide nature of marine insurance, there is a need for harmonization of the legal regimes controlling the rights and obligations of the parties to the insurance contract including international transportation and trade.