In this article, we will discuss Marine Insurance (Basic Principles). So, let’s get started.
Basic Principles
The following basic principles are applicable for Marine Cargo insurance contracts:
Insurable Interest
Indemnity
Utmost Good Faith
Subrogation
Proximate Cause
Contribution
Since applicability of Insurable Interest and Indemnity in Marine Insurance differs from other
branch of insurances, the details of both the principles are to be specifically observed
(i) Insurable Interest: Sec 7 of Marine Insurance Act , 1963 refers that every person has insurable
interest who is interested in marine adventure Sec 8 of MI Act provides that the assured must
be interested in the subject matter insured at the time of the loss though he need not be
interested when the insurance is done.
(ii) Indemnity: Sec. 67 of Marine Insurance Act 7963 states that the sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued
policy to the full extent of the insurable value. or, in the case of a valued policy to the full
extent of the value fixed by the policy Therefore, the Assured is allowed to set the insured value
while effecting the insurance according to the value of consignment shown in the invoice
issued by them. The Assured is allowed to include some mark up, say 10-15% over and above the invoice value. The maximum liability under the policy will be the insured value on which the premium was collected
(iii) Proximate Cause: Proximate cause is the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source Sec. 55 of Marine Insurance Act, 1963 provides included and excluded losses. The insurers are liable to compensate the loss under the subject provision if an insured peril is the proximate cause of loss. However, if an insured peril is only the remote cause of the loss, the proximate cause being an uninsured or excepted peril, the insurers are not liable.
(iv) Utmost good faith: Every contract of insurance is a contract of “uberrimae fidei”, that is, one which requires utmost good faith on the part of both, the insurer and the assured. Sec 19 to 23 of MIA (1963) deals with principle of utmost good faith which states that the contract of
insurance is based on utmost good faith where promise or insured is bound to communicate
to the promisor or the insurer every factor circumstance which will decide by the promisor
whether to accept the insurance or not. In other words, the assured must disclose to the insurer before the conclusion of contract every material circumstance known to the assured as the contract of marine insurance is a contract based upon utmost good faith and if the good faith is not observed by either party, the contract may be avoided by the other party. It is important to note that the duty of disclosure of any circumstance within the knowledge of the Insured will also continue even after the contract is concluded
Example: Where, after attachment of insurance, the original destination is changed by the Insured during the course of voyage, the same should be informed to the Insurer prior to such change.
(v) Subrogation: Sec. 78 of Marine Insurance Act 1963 provides where the insurer pays for a total loss, ether of the whole, or in the case of any apportionable part of the subject matter insured, he there upon becomes entitled to take over the interest of the assured in whatever may remain of the subject matter so paid for and he is thereby subrogated to all the nights and remedies of the assured in and in respect of that subject matter as from the time of the casualty causing the loss. It is to be noted that the Insured will subrogate all his rights and remedies to the Insurer to recover the loss from the wrongdoer after being indemnified.
(vi) Contribution: Sec 80 of MI Act, 1963 states that where the assured is over insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract. It is further stated that if any insurer pays more than his proportion of loss, he is entitled to maintain a suit for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than his proportion of the debt.
