MARINE INSURANCE TERMS & MEANINGS Marine Insurance

(1) A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the insured, in the manner and to the extent agreed in the contract, against (a) losses that are incidental to a marine adventure or an adventure analogous to a marine adventure, including losses arising from a land or air peril incidental to such an adventure if they are provided for in the contract or by usage of the trade; (b) losses that are incidental to the building, repair or launch of a ship. (2) Subject to this Act, any lawful marine adventure may be the subject of a contract.

Marine Adventure
"marine adventure" means any situation where insurable property is exposed to maritime perils, and includes any situation where (a) the earning or acquisition of any freight, commission, profit or other pecuniary benefit, or the security for any advance, loan or disbursement, is endangered by the exposure of insurable property to maritime perils, and (b) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils;

Maritime Perils
"maritime perils" means the perils consequent on or incidental to navigation, including perils of the seas, fire, war perils, acts of pirates or thieves, captures, seizures, restraints, detainments of princes and peoples, jettisons, barratry and all other perils of a like kind and, in respect of a marine policy, any peril designated by the policy; PERILS
6.1 This insurance covers total loss (actual or constructive) of the subject-matter insured caused by 6.1.1 perils of the seas rivers lakes or other navigable waters 6.1.2 fire, explosion 6.1.3 violent theft by persons from outside the vessel 6.1.4 jettison 6.1.5 piracy 6.1.6 breakdown of or accident to nuclear installations or reactors 6.1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation 6.1.8 earthquake volcanic eruption or lightning. 6.2 This insurance covers total loss (actual or constructive) of the subject-matter insured caused by 6.2.1 accidents in loading discharging or shifting cargo or fuel 6.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 6.2.3 negligence of Master Officers Crew or Pilots 6.2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder 6.2.5 barratry of Master Officers or Crew,

Types of Marine Insurance 2.1 Hull and Machinery 2.2 Cargo 2.3 P&I Cover 2.4 Other Third Party Liability Coverage
Towers Legal Liability Ship Builders and Repairers Legal Liability Terminal Operators Legal Liability Marinas and Dock Owners Legal Liability

Specified Perils v All Risks

It is important to distinguish between marine policies that are specified perils v all risks. A specified perils policy is one in which the insurer agrees to indemnify the assured for losses caused by specific perils that are identified in the policy. The Canadian Hulls (Pacific) Clauses are examples of a specified perils policy. A loss must be caused by one of the specified perils in order for it to be covered by the policy. Most hull and machinery policies on commercial vessels are insured on a specified or named perils basis. An all risks policy, on the other hand, provides much broader coverage. An all risks policy is one in which the insurer agrees to indemnify the assured against all risks of loss or damage. Things that are not covered by an all risks policy need to be specifically excluded. Most cargo policies and many policies on yachts and pleasure craft are all risks policies

Underwriters
Underwriters are the entities that agree to indemnify the assured upon the happening of an insured loss. They are also called insurers. Underwriters can be individuals or corporations. Underwriters at Lloyds are represented by various syndicates who negotiate and sign policies on behalf of the names they represent. It is not unusual for a policy of marine insurance to have more than one underwriter. In fact, it is usual for there to be more than one. The policy will name the underwriters and specify the extent of each underwriters interest. The first underwriter named on the policy is the lead underwriter. This is the underwriter that will make most decisions that are required to be made in the event of a loss.

Underwriting Agents
Underwriting agents are entities that have the authority to enter into or sign insurance policies on behalf of the underwriters. They sign as agent on behalf of the underwriters and, because they are agents only, they are not personally liable to the assured under the insurance contract. An underwriting agent may represent more than one underwriter and may sign on behalf of more than one underwriter.

P&I Clubs
P&I Clubs are similar to a mutual insurance company that offers third party liability coverage to shipowners. The members of a P&I Club are shipowners. In a sense, the shipowners are both insurers and assureds. P&I Clubs do not normally issue policies of insurance. Rather, the terms of the coverage they provide are usually set out in the club's Rules.

The Marine Insurance Contract

Although the MIA regulates certain aspects of a marine insurance contract it generally preserves freedom of contract. Therefore, the parties are, for the most part, free to determine the nature and extent of their obligations and responsibilities. The terms of the contract are usually contained in the policy of insurance. There may, however, be a slip or cover note which also evidences the terms of the insurance contract. When reviewing the provisions of the MIA it is extremely important to note that many sections are prefaced with Unless the policy otherwise provides.... This phrase preserves the parties rights to those their own contractual terms and it is therefore always important to review the policy terms to see if they differ from the provisions of the MIA.

Time and Voyage Policies (s. 29 MIA)

A marine policy may be a voyage or time policy. If it uses the words at and from or from a particular place to another place it is a voyage policy. If it insures the subject matter for a period of time it is a time policy. A voyage policy comes to an end at the conclusion of the voyage. A time policy comes to an end upon the expiry of the time specified.

Special Rules For Voyage Policies ss.40-46 MIA

For a voyage policy there is an implied term that the marine adventure will commence within a reasonable time and if it is not, the insurer may avoid the contract unless the insurer waived the right to avoid or was aware of the circumstances causing the delay. (s.40 MIA) A voyage policy will not attach if the ship sails from or to places different from those specified. (s. 41 MIA) Where after the commencement of the risk the destination of the ship is voluntarily changed the insurer is discharged from all liability for any loss occurring on or after the time the intention to change is manifested, unless the policy provides otherwise. (s.42 MIA) A deviation without lawful excuse from the agreed course or customary course discharges the insurer from liability for any loss occurring on or after the deviation. Failure to call at the ports of discharge in the order specified or in their geographical order will be a deviation. (s. 43 MIA) A voyage policy must be carried out with reasonable dispatch and the insurer is discharged from all liability for any loss occurring on or after the time when the delay becomes unreasonable. (s.44 MIA) Pursuant to s.45 MIA a deviation or delay is justified if it is (a) authorised by any special term in the marine policy; (b) caused by circumstances beyond the control of the master and the master's employer; (c) reasonably necessary in order to comply with an express warranty or an implied warranty; (d) reasonably necessary for the safety of the ship or subject-matter insured; (e) for the purpose of saving human life or aiding a ship in distress where human life may be in danger; (f) reasonably necessary for the purpose of obtaining medical aid for any person on board the ship; or

(g) caused by the barratrous conduct of the master or crew, if barratry is one of the perils insured against. Where transhipment at an intermediate port or place is necessitated by a peril insured against the insurer continues to be liable under the voyage policy for a loss occurring on or after the date of transhipment. (s. 46 MIA)

Valued and Unvalued Policies (s.30 MIA)

A marine policy may be a valued or unvalued policy. If it specifies the agreed value of the subject matter it is a valued policy. If it does not specify the agreed valued but instead provides a limit of the sum insured it is an unvalued policy. In the event of a total loss under a valued policy, the amount of the indemnity is the agreed value. In the event of a total loss under an unvalued policy, the amount of the indemnity is calculated pursuant to s. 19 MIA. In the case of a ship, the indemnity is the value of the ship at the time of the commencement of the risk plus the insurance charge. In the case of cargo, the indemnity is the prime cost of the goods, plus the shipping and insurance expenses.

Floating Policies (s.31 MIA)

A marine policy may be a floating policy. A floating policy is one which leaves the name of the ship or other particulars to be provided at a later time by declaration or endorsement. Floating policies are frequently used by shippers who routinely ship cargo. Floating policies avoid a shipper having to negotiate a new policy for every shipment. Using a floating policy the essential terms of the insurance contract are agreed in advance. Thereafter, all of the shippers goods will be overed by that policy provided the shipper declares the goods as required by the contract. The shipper must declare all of the goods that are covered by the policy and their value. A failure to properly declare will jeopardise the insurance coverage although an omission or error made in good faith may be rectified even after a loss or the arrival of the goods. If a declaration of value is not made until after a loss or arrival of the goods, the indemnity is calculated as though the policy was an unvalued policy.

Utmost Good Faith s.20 MIA

20. A contract is based on the utmost good faith and, if the utmost good faith is not observed by either party, the contract may be avoided by the other party.

Implied Warranties
There are three warranties implied by the MIA. They are the warranty of legality, neutrality and seaworthiness.

Legality
There is an implied warranty in every marine policy that the marine adventure insured is lawful and, in so far as the insured has control, will be carried out in a lawful manner. The warranty of legality is one which is often expressly included in policies as well as implied. Where there is an express warranty of legality it will have precedence over the implied warranty to the extent the two are inconsistent.

Neutrality
(1) Where in any marine policy insurable property is expressly warranted to be neutral, there is an implied condition in the policy (a) that the property will have a neutral character at the commencement of the risk and that, in so far as the insured has control, that character will be preserved during the risk; and (b) where the property is a ship, that, in so far as the insured has control, the papers necessary to establish the neutrality of the ship will be carried on the ship and will not be falsified or suppressed and no simulated papers will be used. (2) If any loss occurs through a breach of the implied condition referred to in paragraph (1)(b), the insurer may avoid the contract.

Seaworthiness
(1) There is an implied warranty in every voyage policy that, at the commencement of the voyage, the ship will be seaworthy for the purpose of the particular marine adventure insured. (2) Where a voyage policy attaches while the ship is in port, there is an implied warranty in the policy that the ship will, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port. (3) Where a voyage policy relates to a voyage performed in different stages during which the ship requires different or further preparation or equipment, there is an implied warranty in the policy that, at the commencement of each stage, the ship is seaworthy for the purposes of that stage. (4)There is no implied warranty in any time policy that the ship will be seaworthy at any stage of the marine adventure, but where, with the privity of the insured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness. (5)A ship is deemed to be seaworthy if it is reasonably fit in all respects to encounter the ordinary perils of the seas of the marine adventure insured. (1) There is no implied warranty in any marine policy on insurable property, other than a ship, that the insurable property is seaworthy. (2) There is an implied warranty in every voyage policy on insurable property, other than a ship, that, at the commencement of the voyage, the ship is seaworthy and reasonably fit to carry the insurable property to the destination contemplated by the policy. The implied warranty of seaworthiness applies with full effect only to voyage policies. The warranty is that the ship will be seaworthy "at the commencement of the voyage" for the particular adventure insured. A seaworthy ship is one that is "reasonably fit in all respects to encounter the ordinary perils of the adventure insured". In a time policy there is no warranty of seaworthiness but "where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness". Thus, in a voyage policy the insurer needs to prove only one thing; that the ship was unseaworthy at the commencement of the voyage. In a time policy, on the other hand, the insurer needs to prove three things; that the ship was unseaworthy, that the unseaworthiness caused the loss, and that the assured was privy to the unseaworthy state of the ship.

The warranty of seaworthiness relates not only to the hull but also to the machinery and equipment, the crew, and the way in which a ship is loaded (or overloaded). In Laing v Boreal Pacific (2000) 264 N.R. 378, which concerned a time policy, it was held that an overloaded vessel was unseaworthy to the knowledge of the owner and the insurer was entitled to avoid liability. There is no implied warranty of seaworthiness with respect to property other than a ship, i.e. to cargo but, if the policy is a voyage policy there is an implied warranty that the ship is seaworthy.

Express Warranties
(1) An express warranty may be in any form of words from which the intention to warrant may be inferred. (2) An express warranty must be included in, or written on, the marine policy or be contained in a document incorporated by reference into the policy. (3) An express warranty does not exclude an implied warranty, unless they are inconsistent.

Express Warranty v Suspensive Conditions

Pursuant to s. 33, an express warranty may be in any form of words from which the intention to warrant may be inferred. Unfortunately, it has proven difficult for insurers to find the exact words that will lead to the required inference. Words such as warranted that have been held to not necessarily delineate a warranty (Century Insurance Company of Canada v Case Existological Laboratories Ltd. (The "BAMCELL II"), [1983] 2 S.C.R. 47) Similarly, the words warranted free from any claim... were held not to delineate a warranty in Tulloch v Canada, (1989) 96 N.R. 51. In both of these cases the courts held that it is necessary to distinguish between a true warranty and warranty that merely delimits and is part of the description of the risk. The latter is often referred to as a suspensive condition. The difference between the two is the consequence that flows from the breach. A breach of a true warranty discharges the insurer from liability from the time of the breach. A breach of a suspensive condition, on the other hand, merely interrupts or suspends the coverage during the currency of the breach. The words of the policy must therefore be carefully considered to determine whether a particular provision is a true warranty. Where the words used specifically provide that a breach of a particular provision will discharge the insurer from liability from the date of the breach, then the provision will most likely be construed as a true warranty. However, if the consequences of a breach are not described, regard must be had to the nature of the provision and the surrounding circumstances to determine its proper classification.

Examples of Express Warranties

The number and type of express warranties are limited only by the imagination and ingenuity of underwriters. Almost anything can be made to be an express warranty provided the proper words are used. Notwithstanding this total freedom to make almost anything a warranty most policies contain relatively few. The more common express warranties are: Navigation and trading warranties that limit the geographical areas in which a vessel may operate; Laid up and out of commission warranties that require a vessel to be laid up for a

defined period or generally; Identity of the master warranties that require a named person to command the vessel; Towing warranties that prohibit the insured vessel from being towed except where customary or when the vessel is in need of assistance; Private pleasure use warranties that prohibit any commercial use of a yacht; and Warranties regarding surveys and inspections that require inspections to be conducted or recommendations by surveyors to be complied with.

Consequences of Breach
(1) Subject to this section, a warranty must be exactly complied with, whether or not it is material to the risk. (2) Subject to any express provision in the marine policy or any waiver by the insurer, where a warranty is not exactly complied with, the breach of the warranty discharges the insurer from liability for any loss occurring on or after the date of the breach, but does not affect any liability incurred by the insurer before that date. (3) A warranty that the subject-matter insured is "well" or "in good safety" on a particular day is not breached if the subject-matter is safe at any time during that day. (4) A breach of a warranty is excused if, because of a change of circumstances, the warranty ceases to be applicable to the circumstances contemplated by the contract or if compliance with the warranty is rendered unlawful by any subsequent law. (5) It is no defence to a breach of a warranty that the breach was remedied and the warranty complied with before any loss was incurred. It should be noted that a breach of a warranty discharges an insurer from liability from the date of the breach. This is the case even if the breach is remedied before any loss. The insurer is also not required to make an election as with a failure to disclose material facts or a misrepresentation. Moreover, there is no requirement that the warranty be material to the risk. The consequences of a breach of warranty may only be avoided by an express relieving provision in the policy or by a waiver of the breach by the insurer. A waiver will only be found where the insurer has full knowledge of the breach and demonstrates an intention to treat the contract as continuing.

Total Loss
(1) A loss is an actual total loss if the subject-matter insured is destroyed or is so damaged as to cease to be a thing of the kind insured or if the insured is irretrievably deprived of the subject-matter. (2) Where a ship engaged in a marine adventure is missing and no news of the ship is received within a reasonable period, an actual total loss may be presumed.

Measure of Indemnity for Total Loss

Subject to this Act and any express provision in the policy, the measure of indemnity in respect of a total loss of the subject-matter insured is (a) in the case of an unvalued policy, the insurable value of the subject-matter; and (b) in the case of a valued policy, the value of the subject-matter specified by the policy.

Constructive Total Loss

In essence, a constructive total loss occurs when the insured property is still in existence but either cannot be retrieved or the cost of retrieving and/or repairing it will exceed its value. Constructive total loss is defined and dealt with in s. 57 MIA but the parties are free to themselves define those situations that will constitute a constructive total loss under their policy. 57. (1) Unless a marine policy otherwise provides, a loss is a constructive total loss if the subject-matter insured is reasonably abandoned because the actual total loss of the subject-matter appears unavoidable or the preservation of the subject-matter from actual total loss would entail costs exceeding its value when the costs are incurred. (2) Without limiting the generality of subsection (1), a loss is a constructive total loss if (a) in the case of a ship or goods, the insured is deprived of possession of the ship or goods by reason of a peril insured against and either the insured is unlikely to recover the ship or goods or the cost of recovery would exceed the value of the ship or goods when recovered; (b) in the case of a ship, the ship is so damaged by a peril insured against that the cost of repairing it would exceed the value of the ship when repaired; or (c) in the case of goods, the goods are so damaged that the cost of repairing and forwarding them to their destination would exceed the value of the goods on arrival. (3) For the purposes of paragraph (2)(b), in estimating the cost of repairing a ship, no deduction may be made in respect of general average contributions to the repairs payable by other interested persons, but account is to be taken of the cost of future salvage operations and of any future general average contributions to which the ship would be liable if repaired.

Abandonment
Where there is a constructive total loss the assured may either treat the loss as a partial loss or may treat it as a total loss. If the assured elects to treat it as a total loss, the assured must abandon the property to its insurers by delivering a notice of abandonment. The insurer may either accept the notice of abandonment or reject it. If the insurer accepts the notice it becomes obligated to pay as though there was a total loss and it acquires the interest of the assured in the property. 58. (1) An insured may treat a constructive total loss as a partial loss or may abandon the subject-matter insured to the insurer and treat the constructive total loss as an actual total loss. (2) Subject to this section and section 59, an insured who elects to abandon the subject-matter insured to the insurer must give a notice of abandonment to the insurer with reasonable diligence after the insured receives reliable information of the loss. (3) An insured who receives doubtful information of a loss is entitled to a reasonable time to make inquiries before giving a notice of abandonment. (4) An insured may give a notice of abandonment orally or in writing, or partly orally and partly in writing, and in any terms that indicate the insured's intention to abandon unconditionally the insured interest in the subject-matter to the insurer.

(5) If an insured fails to give a notice of abandonment as required by this section, the constructive total loss may be treated only as a partial loss. 59. (1) An insured is not required to give a notice of abandonment to the insurer if (a) the loss is an actual total loss; (b) notice is waived by the insurer; or (c) at the time the insured receives information of the loss, there is no possibility of benefit to the insurer if notice were given to the insurer. (2) An insurer who has reinsured a risk is not required to give a notice of abandonment to the reinsurer. 60. (1) If an insured gives a notice of abandonment as required by section 58, the rights of the insured are not prejudiced by a refusal of the insurer to accept the abandonment. (2) An acceptance of an abandonment may be either express or implied from the conduct of the insurer, but the mere silence of an insurer after a notice of abandonment is given does not constitute an acceptance. (3) On acceptance of an abandonment, the abandonment is irrevocable. (4) On acceptance of an abandonment, the insurer (a) conclusively admits liability for the loss and the sufficiency of the notice of abandonment; and (b) is entitled to acquire the interest of the insured in whatever remains of the subject-matter insured, including all proprietary rights incidental thereto. (5) On acceptance of the abandonment of a ship, the insurer is entitled to (a) any freight being earned at the time of, or earned subsequent to, the casualty causing the loss, less the costs incurred in earning it after the casualty; and (b) if the ship is carrying the shipowner's goods, reasonable remuneration for the carriage of the goods subsequent to the casualty.

Partial Losses
61. (1) A partial loss is any loss that is not a total loss. (2) Where insured goods reach their destination in specie but cannot be identified by reason of obliteration of marks or otherwise, the loss, if any, is a partial loss. (3) Unless a marine policy otherwise provides, an insured who brings an action for a total loss but establishes only a partial loss may recover for a partial loss.

Measure of Indemnity for Partial Loss Of the Ship

Subject to any express provision in the marine policy, the measure of indemnity in respect of a partial loss of a ship is (a) where the ship is repaired, the reasonable cost of the repairs less the customary deductions, but not exceeding the sum insured in respect of any one casualty; (b) where the ship is partially repaired, the aggregate of the reasonable cost of the repairs, as determined under paragraph (a), and the reasonable depreciation, if any, arising from the unrepaired damage, the aggregate not exceeding the cost, as determined under paragraph (a), of repairing the whole damage; and (c) where the ship is not repaired and is not sold in a damaged state during the risk,

the reasonable depreciation arising from the unrepaired damage, but not exceeding the cost, as determined under paragraph (a), of repairing the damage.

Of Goods
70. (1) Subject to any express provision in the policy, the measure of indemnity in respect of a partial loss of goods or movables is (a) where part of the goods or movables insured by an unvalued policy is totally lost, the insurable value of the part lost, ascertained as in the case of a total loss; (b) where part of the goods or movables insured by a valued policy is totally lost, that proportion of the value of the goods or movables specified by the policy that the insurable value of the part lost bears to the insurable value of all the goods or movables, ascertained as in the case of an unvalued policy; and (c) where the whole or any part of the goods or movables is delivered damaged at its destination, that proportion of the insurable value of all the goods or movables, in the case of an unvalued policy, or the value of all the goods or movables specified by the policy, in the case of a valued policy, that the difference between the gross value of all the goods or movables in a sound condition at that destination and their gross value in their damaged condition at that destination bears to the gross value of all the goods or movables in a sound condition at that destination.

Sue and Labour Expenses

79. (1) Where a marine policy contains a sue and labour clause, the engagement thereby entered into is supplementary to the contract and the insured may recover from the insurer any expenses properly incurred under the clause, even if the insurer has paid for a total loss of the subject-matter insured or the subject-matter insured is warranted free from particular average, either wholly or under a specified percentage. (2) General average losses, general average contributions, salvage charges, and expenses incurred for the purpose of averting or diminishing a loss by a peril not insured against are not recoverable under a sue and labour clause.

Third Party Liability

73. Subject to any express provision in the policy, the measure of indemnity in respect of any liability to a third party that is expressly insured against by a marine policy is the amount paid or payable by the insured to the third party in respect of the liability.

Proportional Liability
75. Where a loss is recoverable under a marine policy, the insurer, or each insurer if there is more than one, is liable for that proportion of the measure of indemnity in respect of the loss that the amount subscribed by the insurer is of (a) in the case of an unvalued policy, the insurable value of the subject-matter; and (b) in the case of a valued policy, the value of the subject-matter specified by the policy.

Successive Losses
78. (1) Subject to this Act and unless the marine policy otherwise provides, an insurer is liable for successive losses, even if the total amount of the losses exceeds the sum insured. (2) Where, under a marine policy, a partial loss that has not been repaired or otherwise made good is followed by a total loss, the insurer is liable only for the total loss. (3) Nothing in subsections (1) and (2) shall be construed as affecting the liability of an insurer under a sue and labour clause.

Relief Against Forfeiture

Pursuant to the common law and law of equity as well as various statutes of general application, the Courts have a power and discretion to relieve against forfeiture. There have been many cases in which this discretion has been exercised to prevent an insurer from avoiding an insurance policy for breach of a condition, including a condition relating to notice. The predominant factor leading the Courts to exercise this discretion is lack of prejudice. The insurer cannot simply rely on the failure to give notice or the passage of time. Rather, the insurer must show that it has, in fact, been prejudiced in some material way, such as by a judgement having been rendered against the assured or by a disappearance of material witnesses or evidence. It is only when the insurer can show actual prejudice that the Courts will not exercise the discretion in favour of the assured and relieve against the forfeiture of the insurance policy.

Subrogation
(1) On payment by an insurer for a total loss of the whole of the subject-matter insured or, if the subject-matter insured is goods, for any apportionable part of the subject-matter insured, the insurer becomes entitled to assume the interest of the insured in the whole or part of the subject-matter and is subrogated to all the rights and remedies of the insured in respect of that whole or part from the time of the casualty causing the loss. (2) On payment by an insurer for a partial loss of the subject-matter insured, the insurer acquires no title to the subject-matter but is subrogated to all the rights and remedies of the insured in respect of the subject-matter from the time of the casualty causing the loss to the extent that the insured is indemnified, in accordance with this Act, by the payment for the loss.

TERMINATION CLAUSE Under HULL & MACHINERY INSURANCE

This Clause 4 shall prevail notwithstanding any provision whether written typed or printed in this insurance inconsistent therewith. Unless the Underwriters agree to the contrary in writing, this insurance shall terminate automatically at the time of; 4.1 change of the Classification Society of the vessel, or change, suspension, discontinuance, withdrawal or expiry of her Class therein, provided that if the vessel is at sea such automatic termination shall be deferred until arrival at her next port. However where such change, suspension, discontinuance or withdrawal of her Class has resulted from loss or damage which would be covered by an insurance of the vessel subject to current Institute Time Clauses Hulls or Institute War and Strikes Clauses Hulls-Time such automatic termination shall only operate should

the vessel sail from her next port without the prior approval of the Classification Society, 4.2 any change, voluntary or otherwise, in the ownership or flag, transfer to new management, or charter on a bareboat basis, or requisition for title or use of the vessel, provided that, if the vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, such automatic termination shall if required be deferred, whilst the vessel continues her planned voyage, until arrival at final port of discharge if with cargo or at port of destination if in ballast. However, in the event of requisition for title or use without the prior execution of a written agreement by the Assured, such automatic termination shall occur fifteen days after such requisition whether the vessel is at sea or in port. A pro rata daily net return of premium shall be made.

Qsn; Difference between GENERAL AVERAGE & PARTICULAR AVERAGE? Ans; Following are the differences bween GA & PA: 1. General average is incurred for the benefit of all interests but the particular average is in connection with any of the interests. 2. General average is always voluntary and intentional but the particular average is an accidental or fortuitous. 3. General average is shared by all those who are benefited by the general average act. Particular average is paid by the insurer. 4. General average may include expenditure and sacrifice along with loss, whereas the particular average results from a loss or damage.
Qsn; What is War Risk Clause? Ans; War Risk Clause; A typical war risk clause will cover act of war, civil war, hostilities, revolution, rebellion, civil commotion, warlike operations, laying of mines acts of piracy, acts of terrorists, acts of hostility or malicious damage, blockades But what exactly is included within the scope of a war risks clause? It is interesting to note that not all war risks clauses refer to terrorism, especially the outdated versions of these clauses. Note: War Risk Claues is basically for the Damages, Delays caused by the War like or terrorist activities at Sea or in Port and also if a vessel gets stuck in such areas for indefinite period of time & liabilities following that. Effect of the exercise of war risks clauses A typical war risk clause provides Owners with two different remedies, in the situation where the war is taking place at the intended destination of the charter party. Firstly, the vessel can not be made to call at a location which is subject to a blockade / war / hostilities / warlike operations or exposes the vessel to a risk of capture or seizure. The clause may also give importance to whether the location is considered dangerous, and may make reference to the reasonable opinion of the master or owners which will be judged objectively. Secondly, following on from events in Iraq, the Owners may now frequently be given liberty to comply with directions from the flag state, war risk underwriters, any other government, the Security Council of the UN and directives of the European Community. If the clause is triggered provisions are made as to discharge of cargo elsewhere or, if the vessel proceeds, as to payment of additional insurance.

Qsn; Role of Average Adjustor? Ans; 1) Average Adjusters are expert in the law and practice of general average and marine insurance. Fellows of the Association of Average Adjusters have demonstrated their expertise by rigorous examination. 2) Average Adjusters prepare claims under marine insurance policies which generally involve loss or damage to marine craft, their cargoes or freight. They may also be called upon to prepare statements of claim against third parties and to deal with the division of recoveries from third parties. 3) General Average is a particular area of expertise. Average Adjusters are usually instructed to collect general average security, and also salvage security, and to prepare general average statements and to assist in effecting settlements there under. 4) Average Adjusters may be appointed by any party involved in a marine claim. However, irrespective of the identity of that party, the Average Adjuster is bound to act in an impartial and independent manner. Qsn; Procedure for calling Port of Refuge? Ans; Below is the general procedure to follow after giving a Port of Refuge call.

After giving port of refuge signal, the master would inform the owners and charters about the condition of the ship. Ships exact position would be noted After giving out the call for port of refuge, a separate record is maintained for all the additional expenditure that would be involved in the process The ship would seek for health clearance An agent would be appointed (At POR) who would inform the port authority, pilot, local P&I surveyors, port health department, immigrations, customs and other necessary services required The vessel would then enter as under average (GA) Once the ship arrives at the port safely, the owners and charters would declare it general average A note of protest is issued, if required The classification society is informed In case there is any damage to the ships structure, the insurance agent is informed In case there is damage to the ships cargo, P&I club is informed If required, arrangement of cargo discharge, transhipment or warehousing of cargo is made GA bond (general average bond) and GA (general average) guarantee are provided in case the voyage is terminated Once the surveyors are finished with their reports, tenders are called for repairs in association with Salvage Association Surveyor and Insurance agent Completion of repairs are followed by another inspection by the class If the ship is found sea worthy an interim certificate is issued for the final certificate Once the ship is allowed to continue for voyage, reloading of cargo is carried out The note of protest would be extended with the details of damage and repairs All bills are then paid by the port agent Relevant documents are sent to the owners for onward transmission to average adjuster The ship enters vessel outwards on receiving custom outward clearance The voyage can then be safely continued

Qsn; How Does P&I Club raise funds for paying claims and management costs? Ans; Marine insurers charge a premium, which guarantees to the assured full cover during the validity of
the policy; but P&I insurance is financed not by premiums but by calls. Club members contribute to the clubs common pool, out of which claims are paid. If the pool is insufficient, the club members will be asked to pay a further call; but if the pool is in surplus, the club will ask for a reduced call the following year, or may even make a refund to members. (Only ship operators with a sound reputation will be allowed to join a P&I club; and any P&I club member who incurs reckless or avoidable losses to the club may be asked to leave) Whereas a marine insurer will, on average, pay out 70 for every 100 received in premiums, a P&I club seeks to run as a non-profit-making business. Curiously, the largest P&I club, Norways Gard, manages to combine mutual P&I business with conventional marine insurance. Should the Rotterdam Rules come into force, third-party liabilities will increase; and this may result in conventional insurers losing more and more business to P&I clubs.