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Insurance Law > Marine Insurance > Flashcards

Marine Insurance Flashcards

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1
Q

MAJOR DIVISIONS OF TRANSPORTATION INSURANCE

A

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

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2
Q

Transportation Insurance

A

concerned with the PERILS OF PROPERTY in TRANSIT (or incidental to) as opposed to property perils at generally fixed location

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3
Q

SCOPE of Ocean Marine Insurance

A
  1. SHIPS or Hulls
  2. GOODS or cargoes
  3. EARNINGS such as freight, passage money, commissions, or profits
  4. LIABILITY for the INSURED PROPERTY by reason of MARINE PERILS
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4
Q

SCOPE of Marine Insurance

A
  1. Insurance against LOSS OR DAMAGE
  2. MARINE PROTECTION and INDEMNITY INSURANCE
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5
Q

RISK INSURED AGAINST

A

only PERILS OF THE SEA unless PERILS OF THE SHIP are covered by an ALL-RISK policy

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6
Q

PERILS OF THE SEA

A

(UEO)

  1. UNUSUAL violence
  2. EXTRAORDINARY action of wind and wave; and
  3. OTHER extraordinary causes connected with navigation
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7
Q

PERILS OF THE SHIP

A

(NON)

  1. NATURAL and inevitable action of the sea
  2. 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

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8
Q

Sue and Labor Clause

A

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)

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9
Q

INSURABLE INTEREST in Marine Insurance

A

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

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10
Q

FREIGHTAGE

A

BENEFITS derived by the owner either from

  • CHARTERING
  • EMPLOYMENT FOR THE CARRIAGE
  • his OWN goods
  • goods of OTHERS
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11
Q

CONCEALMENT

A

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

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12
Q

When Concealment DOES NOT vitiate entire contract

A

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
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13
Q

DISTINCTIONS on Concealment

A

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

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14
Q

REPRESENTATION

A

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

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15
Q

EFFECT of False Representation by the Insured

A

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

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16
Q

EFFECT of Falsity as to EXPECTATION

A

eventual falsity of representation as to expectation DOES NOT, in the absence of fraud, AVOID a contract of MI

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17
Q

WARRANTY

A

STIPULATION, express or implied, FORMING PART of the policy as to some

FACT

CONDITION

CIRCUMSTANCE

in relation to the risk

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18
Q

IMPLIED WARRANTIES

A

(PA2NS)

  1. PRESENCE of Insurable Interest (Sec. 102)
  2. AGAINST improper deviation (Sec. 126, 127, 128)
  3. AGAINST illegal venture***
  4. 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

  1. SEAWORTHINESS (Sec. 115)
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19
Q

SEAWORTHINESS

A

(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

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20
Q

TEST OF SEAWORTHINESS

A

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

21
Q

COVERAGE of the Warranty of Seaworthiness

A

(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
22
Q

DEVIATION

A

(SEC. 125)

(DUC)

DEPARTURE from the course of the voyage

UNREASONABLE DELAY in pursuing the voyage

COMMENCEMENT of an entirely different voyage

23
Q

INSTANCES OF DEVIATION

A

(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
24
Q

PROPER DEVIATION

A

(CANS)

(Sec. 126)

  1. CAUSED by circumstances OUTSIDE THE CONTROL of the ship captain or shipowner
  2. made in good faith to AVOID a peril (non-existing/assumed peril)
  3. NECESSARY to COMPLY WITH WARRANTY or AVOID a peril (real peril)
  4. made in good faith to SAVE human life, or to RELEIVE another vessel in distress
25
Q

IMPROPER DEVIATION

A

every deviation not under PROPER DEVIATION

26
Q

ACTUAL TOTAL LOSS

A

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

27
Q

CAUSES of Actual Total Loss

A

(DITO)

(Sec. 132)

  1. DAMAGE rendering the thing VALUELESS to the owner for the PURPOSE FOR WHICH he held it
  2. IRRETRIEVABLE LOSS by sinking or by being broken up
  3. TOTAL DESTRUCTION
  4. OTHER EVENT which EFFECTIVELY DEPRIVES the owner of the POSSESSION, at the port of destination of the thing insured
28
Q

PRESUMPTION OF ACTUAL LOSS

A

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)

29
Q

CONSTRUCTIVE OR TECHNICAL LOSS

A

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

30
Q

CAUSES of Constructive Loss

A

(DEAC)

  1. DAMAGE reducing by more than 3/4 the VALUE OF THE VESSEL (or) of CARGO (Sec. 141)
  2. EXPENSE OF transshipment EXCEEDS 3/4 of the value of the cargo (Sec. 133 in relation to 141)
  3. ACTUAL LOSS of more thhan 3/4 of the VALUE OF THE OBJECT or expense to recover it (Sec. 141)
  4. 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*
31
Q

OPTIONS of Insured in case of Contructive Total Loss

A
  1. ABANDON goods or vessel to the insurer and CLAIM FOR WHOLE INSURED VALUE (Sec. 141)
  2. WITHOUT ABANDONING the thing insured, CLAIM FOR ACTUAL LOSS (Sec. 157)
32
Q

ABANDONMENT

A

(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)

33
Q

EFFECTS OF ACCEPTANCE

A

(ESIF2)

(Sec. 151-153)

  1. Insurer admits the EXISTENCE of the loss
  2. Insurer admits the SUFFICIENCY of the abandonment
  3. Abandonment becomes IRREVOCABLE unless the ground upon which it was made prove to be unfounded
  4. FREIGHTAGE earned PREVIOUS to the loss belong to the INSURER OF SAID FREIGHTAGE
  5. FREIGHTAGE earned SUBSEQUENTLY belongs to the INSURER OF THE SHIP
34
Q

REQUISITES FOR VALIDITY OF ABANDONMENT

A

(PEN FACT)

  1. NEITHER partial nor conditional
  2. The NOTICE of abandonment must be EXPLICIT and must SPECIFY the PARTICULAR CAUSE of the abandonment
  3. Must be made by giving NOTICE thereof to the insurer which may be done

ORALLY or

IN WRITING

  1. FACTUAL
  2. ACTUAL RELINQUISHMENT by the person insured of his interest in the thing insured
  3. CONSTRUCTIVE TOTAL LOSS
  4. must be made within a REASONABLE TIME after receipt of reliable information of the loss
35
Q

EFFECTS OF ABANDONMENT

A

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

36
Q

INSURER’S LIABILITY for REFUSAL of Abandonment

A

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

37
Q

Measure of Indemnity

VALUED POLICY

A

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
38
Q

Measure of Indemnity

OPEN POLICY

A

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

39
Q

RECOVERY When Profits are SEPARATELY INSURED

A

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

40
Q

PRESUMPTION OF LOSS OF PROFITS

A

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

41
Q

AVERAGE

A

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

42
Q

KINDS OF AVERAGES

A

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

43
Q

RIGHT OF THE INSURED IN GENERAL AVERAGE

A

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)

  1. AFTER the separation of INTERESTS liable to contribution
  2. ID has NEGLECTED or WAIVED his right to contributon
44
Q

FREE FROM PARTICULAR AVERAGE CLAUSE

(FPA CLAUSE)

A

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

45
Q

NEW FOR OLD RULE

A

In case of PARTIAL LOSS of ship or its equipment, the OLD MATERIALS are to be APPLIED towards PAYMENT FOR THE NEW

46
Q

CO-INSURANCE

A

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

47
Q

REQUISITES of Co-Insurance

A
  1. LOSS is partial
  2. AMOUNT OF INSURANCE is LESS THAN the VALUE OF THE PROPERTY INSURED
48
Q

RULES ON CO-INSURANCE

A
  1. applies only to marine insurance
  2. no co-insurance in life insurance
  3. applies in fire insurance when expressly stipulated

Insurance Law (12 decks)

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