Marine Insurance Flashcards
MAJOR DIVISIONS OF TRANSPORTATION INSURANCE
1. OCEAN MARINE INSURANE
one of the oldest written forms of insurance
has to do primarily with the insurance of SEA PERILS
2. INLAND MARINE INSURANCE
of comparatively recent origin and cover primarily LAND or OVER THE LAND TRANSPORTATION PERILS of property shipped by
RAILROADS
AIRPLANES
MOTOR TRUCKS and
OTHER MEANS OF TRANSPORTATION
Transportation Insurance
concerned with the PERILS OF PROPERTY in TRANSIT (or incidental to) as opposed to property perils at generally fixed location
SCOPE of Ocean Marine Insurance
- SHIPS or Hulls
- GOODS or cargoes
- EARNINGS such as freight, passage money, commissions, or profits
- LIABILITY for the INSURED PROPERTY by reason of MARINE PERILS
SCOPE of Marine Insurance
- Insurance against LOSS OR DAMAGE
- MARINE PROTECTION and INDEMNITY INSURANCE
RISK INSURED AGAINST
only PERILS OF THE SEA unless PERILS OF THE SHIP are covered by an ALL-RISK policy
PERILS OF THE SEA
(UEO)
- UNUSUAL violence
- EXTRAORDINARY action of wind and wave; and
- OTHER extraordinary causes connected with navigation
PERILS OF THE SHIP
(NON)
- NATURAL and inevitable action of the sea
- ORDINARY wear and tear of the ship
3, NEGLIGENT failure of the ship’s owner to PROVIDE the vessel with proper equipment to convey the cargo under ordinary conditions
Sue and Labor Clause
clause under which the insurer may become LIABLE TO PAY the insured, IN ADDITION to the loss actually suffered, such EXPENSES as he may have INCURRED in his EFFORTS TO PROTECT the property against a peril for which the insurer would have been liable
(Sec. 165)
INSURABLE INTEREST in Marine Insurance
1. SHIPOWNER
VESSEL - to the extent of its value. Provided that if CHARTERED, the recovery is only up to the AMOUNT NOT RECOVERABLE from the charterer
EXPECTED FREIGHTAGE
2. CARGO OWNER
CARGO
EXPECTED PROFITS
3. CHARTERER
AMOUNT he is LIABLE TO THE SHIPOWNER, if the ship is LOST or DAMAGED during the voyage
EXPECTED PROFITS or FREIGHTAGE if he accepts cargoes from other persons for a fee
HIS OWN CARGO or his CLIENT’S CARGO
4. OWNER/DEBTOR
where the vessel is HYPOTHECATED by bottmry or respondentia
- DIFFERENCE between the value of vessel or goods and the amount of loan
- in loans the repayment is subject to the condition that the vessel or goods given as a security shall arrive safely at the port of destination
- only the EXCESS is INSURABLE, since a loan on bottomry partakes of the nature of an insurance coverage to the extent of the loan accommodation. Same rule applies to hypothecation by respondentia.
5. CREDITOR/LENDER
AMOUNT OF THE LOAN
FREIGHTAGE
BENEFITS derived by the owner either from
- CHARTERING
- EMPLOYMENT FOR THE CARRIAGE
- his OWN goods
- goods of OTHERS
CONCEALMENT
FAILURE TO DISCLOSE any material fact or circumstance which in fact or law is WITHIN, or which OUGHT TO BE WITHIN the knowledge of one party and of which the other HAS NO ACTUAL or PRESUMPTIVE KNOWLEDGE
When Concealment DOES NOT vitiate entire contract
a concealment in MARINE INSURANCE in respect to the following matters DOES NOT VITIATE the ENTIRE CONTRACT but merely EXONERATES THE INSURER from a loss RESULTING FROM the risk concealed:
(WLLNU)
- (Sec.112)*
1. WANT of necessary documents
2. LIABILITY of the thing insured to capture or detention
3. LIABILITY to seizure from breach of foreign laws of trade
4. NATIONAL CHARACTER of the insured
5. USE of false or simulated papers
DISTINCTIONS on Concealment
1. INFORMATION OF 3RD PERSONS
MI - information or belief or expectation of 3rd persons in reference to a material fact is MATERIAL and MUST BE COMMUNICATED
OTHERS - NOT MATERIAL, need not be communicated UNLESS it proceeds from the AGENT OF THE INSURED whose duty is to give information
2. EFFECT OF CONCEALMENT
MI - concealment of any matter under Sec 112 (WLLNU) DOES NOT VITIATE the entire contract but MERELY EXONERATES the insurer from damages arising therefrom
OTHERS - concealment of ANY MATERIAL FACT will VITIATE THE ENTIRE CONTRACT whether or not the loss results from the fact concealed
REPRESENTATION
if a representation by a person insured by a contract of MI is INTENTIONALLY FALSE,
in any material respect, or
in respect of any fact on which the character and nature of the risk depends
the insurer MAY RESCIND the ENTIRE CONTRACT
EFFECT of False Representation by the Insured
1. INTENTIONAL
any misrepresentation of a material fact AVOIDS the policy
2. NOT INTENTIONAL
if the fact misrepresented is MATERIAL to the risk, the insurer MAY ALSO RESCIND the contract FROM THE TIME THE REPRESENTATION BECOMES FALSE
EFFECT of Falsity as to EXPECTATION
eventual falsity of representation as to expectation DOES NOT, in the absence of fraud, AVOID a contract of MI
WARRANTY
STIPULATION, express or implied, FORMING PART of the policy as to some
FACT
CONDITION
CIRCUMSTANCE
in relation to the risk
IMPLIED WARRANTIES
(PA2NS)
- PRESENCE of Insurable Interest (Sec. 102)
- AGAINST improper deviation (Sec. 126, 127, 128)
- AGAINST illegal venture***
- NEUTRALITY (Sec. 122)
the ship will carry the REQUISITE DOCUMENTS of nationality or neutrality of the ship or cargo where such nationality or neutrality is EXPRESSLY WARRANTED
- SEAWORTHINESS (Sec. 115)
SEAWORTHINESS
(Sec. 116)
relative term depending upon the NATURE of the ship, voyage, service and goods denoting in general a ship’s REASONABLE FITNESS to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties in the policy
NOTE: (Sec. 119)
a ship which is SEAWORTHY for the purpose of INSURANCE UPON THE SHIP may be UNSEAWORTHY for the purpose of the INSURANCE UPON THE CARGO
TEST OF SEAWORTHINESS
whether or not the ship is REASONABLY FIT to PERFORM the service and to ENCOUNTER the ordinary perils of the voyage
GR: (Sec. 117)
warranty of seaworthiness is COMPLIED WITH if the ship is seaworthy AT THE TIME OF THE COMMENCEMENT of the risk
Note:
prior or subsequent is NOT a BREACH OF WARRANTY nor is it material;
when the ship becomes unseaworthy DURING the voyage to which an insurance relates, an UNREASONABLE DELAY in repairing the defect EXONERATES the insurer from liability from loss arising therefrom
XP:
1. TIME POLICY (Sec. 117[a])
must be seaworthy AT THE COMMENCEMENT of EVERY VOYAGE she may undertake DURING the PERIOD of the coverage
2. CARGO POLICY (Sec. 117[b])
EACH VESSEL upon which the cargo is SHIPPED or TRANSSHIPPED must be seaworthy AT THE COMMENCEMENT of EACH PARTICULAR VOYAGE
3. VOYAGE POLICY (Sec. 119)
(contemplating voyage in different stages)
the ship must be seaworthy AT THE COMMENCEMENT of EACH stage of the voyage
COVERAGE of the Warranty of Seaworthiness
(CPC-SRO)
- (Sec. 118)*
1. CONDITION of the STRUCTURE OF THE SHIP
2. PROPERLY LADEN
3. provided with a COMPETENT MASTER
4. SUFFICIENT NUMBER of competent officers and seamen
5. REQUISITE appurtenances and equipments - (b-ca-cs-fwfl)*
- ballasts*
- cables and anchors*
- cordage and sail*
- food*
- water*
- fuel*
- lights*
6. OTHER necessary or proper STORES AND IMPLEMENTS for the voyage
DEVIATION
(SEC. 125)
(DUC)
DEPARTURE from the course of the voyage
UNREASONABLE DELAY in pursuing the voyage
COMMENCEMENT of an entirely different voyage
INSTANCES OF DEVIATION
(D3UC)
- (Sec. 125-127)*
1. DEVIATION from the agreed voyage
2. DEPARTURE of vessel from the course of the sailing fixed by mercantile usage
3. DEPARTURE of vessel from the most natural, direct, and advantageous route if NOT fixed by mercantile usage
4. UNREASONABLE DELAY in pursuing the voyage
5. COMMENCEMENT of an entirely different voyage
PROPER DEVIATION
(CANS)
(Sec. 126)
- CAUSED by circumstances OUTSIDE THE CONTROL of the ship captain or shipowner
- made in good faith to AVOID a peril (non-existing/assumed peril)
- NECESSARY to COMPLY WITH WARRANTY or AVOID a peril (real peril)
- made in good faith to SAVE human life, or to RELEIVE another vessel in distress
IMPROPER DEVIATION
every deviation not under PROPER DEVIATION
ACTUAL TOTAL LOSS
ABSOLUTE LOSS which exists
when the subject matter of the insurance is WHOLLY DESTROYED or LOST
when it is SO DAMAGED as NO LONGER TO EXIST in its original character
CAUSES of Actual Total Loss
(DITO)
(Sec. 132)
- DAMAGE rendering the thing VALUELESS to the owner for the PURPOSE FOR WHICH he held it
- IRRETRIEVABLE LOSS by sinking or by being broken up
- TOTAL DESTRUCTION
- OTHER EVENT which EFFECTIVELY DEPRIVES the owner of the POSSESSION, at the port of destination of the thing insured
PRESUMPTION OF ACTUAL LOSS
Actual loss may be PRESUMED from the CONTINUED ABSENCE of a ship without being heard of. The LENGTH OF TIME which is sufficient to raise this presumption depends on the circumstances of each case
(Sec. 132)
CONSTRUCTIVE OR TECHNICAL LOSS
one in which the loss, although NOT ACTUALLY TOTAL, is such CHARACTER that the insured is entitled, if he think fit, to treat it as total by ABANDONMENT, and gives the insured the right to abandon
CAUSES of Constructive Loss
(DEAC)
- DAMAGE reducing by more than 3/4 the VALUE OF THE VESSEL (or) of CARGO (Sec. 141)
- EXPENSE OF transshipment EXCEEDS 3/4 of the value of the cargo (Sec. 133 in relation to 141)
- ACTUAL LOSS of more thhan 3/4 of the VALUE OF THE OBJECT or expense to recover it (Sec. 141)
- if the thing insured is a ship, CONTEMPLATED VOYAGE CANNOT be LAWFULLY PERFORMED without incurring an EXPENSE of more than 3/4 of the value of the thing abandoned (Sec. 132)
* NOTE:*
* freightage cannot be abandoned unless the ship is also abandoned*
OPTIONS of Insured in case of Contructive Total Loss
- ABANDON goods or vessel to the insurer and CLAIM FOR WHOLE INSURED VALUE (Sec. 141)
- WITHOUT ABANDONING the thing insured, CLAIM FOR ACTUAL LOSS (Sec. 157)
ABANDONMENT
(Sec. 140)
an act of the INSURED by which, AFTER a CONSTRUCTIVE TOTAL LOSS, he DECLARES THE RELINQUISHMENT to the insurer of his interest in the thing insured
NOTE:
ACCEPTANCE of an abandonment is NOT NECESSARY
(Sec. 149)
EFFECTS OF ACCEPTANCE
(ESIF2)
(Sec. 151-153)
- Insurer admits the EXISTENCE of the loss
- Insurer admits the SUFFICIENCY of the abandonment
- Abandonment becomes IRREVOCABLE unless the ground upon which it was made prove to be unfounded
- FREIGHTAGE earned PREVIOUS to the loss belong to the INSURER OF SAID FREIGHTAGE
- FREIGHTAGE earned SUBSEQUENTLY belongs to the INSURER OF THE SHIP
REQUISITES FOR VALIDITY OF ABANDONMENT
(PEN FACT)
- NEITHER partial nor conditional
- The NOTICE of abandonment must be EXPLICIT and must SPECIFY the PARTICULAR CAUSE of the abandonment
- Must be made by giving NOTICE thereof to the insurer which may be done
ORALLY or
IN WRITING
- FACTUAL
- ACTUAL RELINQUISHMENT by the person insured of his interest in the thing insured
- CONSTRUCTIVE TOTAL LOSS
- must be made within a REASONABLE TIME after receipt of reliable information of the loss
EFFECTS OF ABANDONMENT
1. TRANSFER OF INTEREST
equivalent to the transfer by the insured of his interest to the insurer with ALL the CHANCES of RECOVERY and INDEMNITY
2. TRANSFER OF AGENCY
acts done in GOOD FAITH by those who were agents of the insured in respect of the thing insured, SUBSEQUENT TO THE LOSS are AT THE RISK of the insurer and FOR HIS BENEFIT
INSURER’S LIABILITY for REFUSAL of Abandonment
he is liable upon an ACTUAL TOTAL LOSS, deducting from the amount ANY PROCEEDS of the thing insured which MAY HAVE COME TO THE HANDS of the insured
Measure of Indemnity
VALUED POLICY
GR:
The parties are BOUND by the valuation, if
- insured HAD SOME INTEREST AT RISK (and)
- NO FRAUD
XP:
may SHOW THE REAL VALUE
- HYPOTHECATED by bottomry or respondentia BEFORE its insurance (and)
- WITHOUT THE KNOWLEDGE of the person actually procuring the insurance
Measure of Indemnity
OPEN POLICY
the following rules shall apply:
1. value of the SHIP
value AT THE BEGINNING of the risk
2. value of the CARGO
actual cost when LADEN ON BOARD or MARKET VALUE at the TIME AND PLACE of lading
3. value of FREIGHTAGE
gross freightage exclusive of primage
4. COST OF INSURANCE
in each case to be added to the estimated value
RECOVERY When Profits are SEPARATELY INSURED
insured is entitled to recover a PROPORTION OF SUCH PROFITS equivalent to the PROPORTION which the value lost of the property bears to the value of the whole
PRESUMPTION OF LOSS OF PROFITS
when profits are INSURED and VALUED by an MI, a loss of them is CONCLUSIVELY PRESUMED from a loss of the PROPERTY OUT OF WHICH they are EXPECTED TO ARISE, and the VALUATION FIXES THEIR AMOUNT
AVERAGE
EXTRAORDINARY or ACCIDENTAL EXPENSE incurred during the voyage for the PRESERVATION of the VESSEL, CARGO, OR BOTH and ALL DAMAGES to the vessel or carge from the time it is loaded and the voyage commenced until it ends and the cargo unloaded
KINDS OF AVERAGES
1. SIMPLE OR PARTICULAR
all expenses and damages caused to the vessel or cargo which have NOT INURED to the COMMON BENEFIT of ALL PERSONS INTERESTED in the vessel or cargo.
IR has NO LIABILITY if the parties stipulated that his liability is for general average only
2. GENERAL OR GROSS
all the damage and expenses which are DELIBERATELY CAUSED in order to SAVE the vessel, the cargo, or both from real and known risks.
LIABILITY of IR is his portion
RIGHT OF THE INSURED IN GENERAL AVERAGE
GR:
When the parties agree that the insurance shall be free from a particular average, the insurer is LIABLE ONLY for a general average loss unless such particular average loss has the EFFECT of DEPRIVING INSURED of POSSESSION at the port of DESTINATION of the WHOLE THING INSURED (in effect there is actual total loss)
The ID may HOLD THE IR DIRECTLY LIABLE for the WHOLE of the INSURED VALUE of the property sacrificed for the general benefit SUBROGATING HIM TO HIS OWN RIGHT OF CONTRIBUTION (or)
DEMAND CONTRIBUTION from the other interested parties as soon as the vessel arrives at her destination
XP: (insured cannot claim)
- AFTER the separation of INTERESTS liable to contribution
- ID has NEGLECTED or WAIVED his right to contributon
FREE FROM PARTICULAR AVERAGE CLAUSE
(FPA CLAUSE)
insurer shall NOT be liable for a particular average but he shall CONTINUE to be LIABLE for his PROPORTION of all general average lossess assessed upon the thing insured
EXCEPTION:
when there is TOTAL DEPRIVATION on the part of the insured of the POSSESSION OF THE THING insured
NEW FOR OLD RULE
In case of PARTIAL LOSS of ship or its equipment, the OLD MATERIALS are to be APPLIED towards PAYMENT FOR THE NEW
CO-INSURANCE
a marine insurer is liable upon a partial loss, ONLY FOR SUCH PROPORTION of the AMOUNT INSURED BY HIM as the loss bears to the value of the whole interest of the insured in the property insured
when the property is insured for LESS THAN its value, the INSURED IS CONSIDERED AS A CO-INSURER of the DIFFERENCE between the AMOUNT OF INSURANCE and the VALUE OF THE PROPERTY
REQUISITES of Co-Insurance
- LOSS is partial
- AMOUNT OF INSURANCE is LESS THAN the VALUE OF THE PROPERTY INSURED
RULES ON CO-INSURANCE
- applies only to marine insurance
- no co-insurance in life insurance
- applies in fire insurance when expressly stipulated
