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Indemnity marine insurance contracts: basic features and cover provided

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The Principle of Indemnity in Marine Insurance Contracts

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References

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  26. It should be noted that a shareholder can insure his shares against loss of value due to the failure of an adventure that his company is embarked upon [Wilson v Jones (1867) L.R. 2 Ex. 139] and a creditor may insure against his debtor’s insolvency [Waterkeyne v Eagle Star Insurance (1920) 5 Ll.L.Rep. 12] so that the practical results of the decision in Macaura v Northern Assurance Co Ltd [1925] AC 619 can be substantially mitigated. The more recent decision of the Court of Appeal in Glengate-KG Properties Ltd v Norwich Union Fire Insurance Society [1996] 1 Lloyd’s Rep. 614 was concerned with the interpretation of the phrase “the interest of the insured” in a policy covering the insured owner of a building against consequential loss following a fire or other insured peril. The issue was whether or not the insured could recover for the loss of the architects’ plans that were owned by the architects although they might one day have been acquired by the insured. The Court of Appeal held that the insured had an interest in the plans, notwithstanding the lack of a proprietary interest in them, but it is clear that the majority regarded that interest as being to insure in respect of consequential loss and not to insure the plans themselves. (Birds J, Hird NJ (2001) Bird’s Modern Insurance Law, London, S&M, p. 53).

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  55. As per s. 51 of the Marine Insurance Act 1906.

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  60. Interim insurance contracts are concluded in the form of cover notes, and are valid for the period between the agreement on coverage and the signing of the policy (Campbell D (2001) International Insurance Law and Regulation, Vol. I, Oceana Publications, Section GRE, p 6).

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  62. In addition the International Convention on Arrest of Ships 1999 explicitly al lows arrest for premiums including mutual insurance calls (Argyriadis AA (1986) Elements of Insurance Law, 4th edn. Sakkoulas Publications, Thessaloniki, Greece).

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  70. The American authorities, however, differ upon insurable interest in some im portant respects from English law, and must not be presumed to be identical. Thus, American courts have been prepared to treat a “p.p.i.” policy as ordi nary indemnity insurance if interest could in fact be shown and there was no intention to wager, Brown v Merc.Mar. Ins. Co. 152 Fed. Rep.411.(C.C.A. 9,1907); Hall v Jefferson Ins. Co., 279 F.893 (S.D.N.Y.D.C. 1921); Cabaud v Federal Ins. Co., 37F.2d23 (CCA. 2,1930); The Hal Hsuan (No. 2), [1958]2 Lloyd’s Rep. 578 (D.C, Md), (Legh-Jones N et al (2002) MacGillivray on Insurance Law, 10th edn, London, S&M, Ch.l).

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  71. The insurable interest must be held at the time of the loss (Hooper v Robinson 98 US (8 Otto) 528.25 L.Ed. 219 (1878); Hart v Delaware Ins.Co., 11F.Cas 683 (CCDPa. 1869 (No 6150); Chase v Hammond Lumber Co, 79 F.2d 716 (9th Circ. 1935).

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  72. Hall & Co v Jefferson Ins Co, 279 F.892 (SDNY 1921); Such “honour pol cies” are used when it is difficult to ascertain if the interest insured is “insurable”, even though commercial practice is to insure that interest.

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  73. The John Russel 68 F.2d. 901 (2nd Circ) 1934.

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  99. A strict approach on insurable interest was taken in the South Australian Su preme Court case of Truran Earthmovers Pty Ltd v Norwich Union Fire Insurance [(1976) 17 SASR 1], which involved the purchase of a bulldozer. The purchaser was held to have no insurable interest in the bulldozer even though he had lent the owner money which was to be deduced from the purchase price.

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  108. At first instance, Justice Carruthers stated that, consistently with the fundamental principle that a contract of insurance is a contract of indemnity, an insured cannot rely on a “lost or not lost” clause unless the loss falls on it. He held that the loss in question had clearly not fallen on the insured, even though it had already paid for the goods, who was entitled to recover the purchase price from the sellers. In contrast, the Court of Appeal found that the insured had suffered a loss even though the insured was not at risk when the goods were stolen. It was sufficient that the insured suffered financial loss because of the prior loss of the goods. The fact that it had contractual remedies against its sellers was no barrier to a claim on the insurance (Derrington S (2002) Australia: Perspectives and Permutations on the Law of Marine Insurance, Ch. 11 In Thomas R (ed) The Modern Law of Marine Insurance, Vol. 2, LLP).

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  115. The new International Hull clauses 2002 were published on 1 November 2002 and were revised again on 1 November 2003. Known as International Hull clauses 1/11/02 and International Hull clauses 1/11/03 respectively, they supersede the 1995 Hull clauses with the aim to provide clarity and reduce uncertainty for both the shipowners and the underwriters and to bring the standard wordings up-to-date with current market price. The new clauses update, as opposed to revise, the 1983 and 1995 wordings, and have improved the clarity of previous ones, by simply being closer into line with practice. The new clauses leave more complex areas to be debated at the next revision. A market-wide review of the clauses is under way, as the Joint Hull Committee undertook to make a six month assessment of how the new clauses were working.; (Wall DJ (2003) International Hull clauses 1/11/02: A Commentary, Shipping & Trade Law, Vol.3, No 1); Lloyd’s List News(2003) Fresh Look at Hull Clauses Under Way).

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  117. This limit is not likely to affect the run-of-the-mill collisions; rather it will very likely only “bite” in cases involving very low insured values or substantial collisions (Wall, DJ (2003) International Hull Clauses 1/11/02: A Commentary, Shipping & Trade Law, Vol.3, No 1).

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  119. Once this is proved, the onus of proof switches to the insurer to demonstrate that the loss arose as a result of a specific excepted peril (Merkin R (2002) Colinvaux & Merkin’s Insurance Contract Law, S&M London, Para. B-0570-B-0591, The Coverage of Marine Policies.)

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  127. The principle of universality of insured risks is preserved. The concept includes coverage of all events that may happen in a sea voyage, i.e. it covers maritime perils in the broad sense of the term (Argyriadis A (1979): Marine Insurance: A General Comparative View in the Light of Greek Law, Revue Héllenique de Droit International, 32:28–40).

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  128. Piraeus Court of Appeal: 265/1999 EϕΠɛıρ EɛμπΔ 2000, 116.

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  129. The practical significance of characterising an insurance contract as a marine one rather than a general one (terrestrial) within the Greek law system is a rather procedural one, i.e. in the case of the former the time-barring for legal action is two years whereas in the latter it is three years. (Rokas I (1995) Intro duction to the Law of Private Insurance, 4th edn, Oikonomikon Publications, Athens, p 3)

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  143. Except where the contract provides for the application of foreign law (where this is permissible) it seems that either the Marine Insurance Act 1909 or the Insurance Contracts Act must apply to the whole of any contract of general insurance not covered by another statutory scheme. Neither Act appears to contemplate the splitting of a contract or policy between them. The Insurance Contracts Act was drafted with clear knowledge of the provisions of the Marine Insurance Act 1909 but there is no provision in the Insurance Contracts Act which anticipates that one or other Act might apply to severable portions of the contract. Therefore, in some circumstances there may be uncertainty as to whether a contract of insurance is one to which the Marine Insurance Act 1909 applies (Derrington S (2002) Australia: Perspectives and Permutations on the Law of Marine Insurance, Ch. 11 In Thomas R (ed) The Modern Law of Marine Insurance, Vol. 2, LLP).

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  144. In Norsworthy & Encel v SGIG, [Unreported, per Olsen J, Supreme Court of South Australia, Nov. 30, 1999.], the plaintiffs sustained personal injuries and property damage in a boating accident during a diving excursion operated by “G.D.C. Pty Ltd” (GDC). GDC was insured by SGIC, the State Government Insurance Corporation, pursuant to a policy described as being one of “marine insurance”. GDC went into liquidation and the insurer was sued directly by the plaintiffs. The issue as to which statute governed the policy became then apparent; s.51 of the insurance Contracts Act makes limited provision for a right of direct action by third parties against insurers. There is no equivalent provision in the Marine Insurance Contracts Act 1909. The Insurance Contracts Act does not apply to contracts to which the Marine Insurance Act 1909 applies; and the Marine Insurance Act 1909 does not apply to “state marine insurance”. Thus, there seems to exist a hiatus in the law governing contracts of marine insurance written by state insurers. However, being properly construed as a marine policy, the contract of insurance here was held to be governed by the Marine Insurance Act 1909 and there was no prospect of direct action by the third party plaintiff against the insurer (Derrington S (2002) Australia: Perspectives and Permutations on the Law of Marine Insurance, Ch. 11 In Thomas R (ed) The Modern Law of Marine Insurance, Vol. 2, LLP).

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  145. The uncertainty as to the applicable law also arises in the context of cargo insurance where more than one form of carriage is often involved in the carriage of goods. In Con Stan Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Limited, [(1986)160 CLR 226], was a case involving insurance of stock and trade from a variety of risks, no evidence was lead to illustrate the importance of the carriage of goods by sea, the policy and its term indicated that it was but one part of one section of the cover afforded. The High Court held that it could not be held that the policy, viewed in its entirety, indemnified the insured against losses substantially incidental to a marine adventure. The case shows that a policy covering various modes of transport will be governed by the Insurance Contracts Act if there is no evidence that sea transport predominates (Derrington S (2002) Australia: Perspectives and Permutations on the Law of Marine Insurance, Ch. 11 In Thomas R (ed) The Modern Law of Marine Insurance, Vol. 2, LLP).

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  146. whilst in practice the need to make this distinction is limited, there are instances in which commercial navigation may occur on inland waters whether incidental to a sea voyage or not. Of course, most inland waters in Australia are used for pleasure craft, the insurance of which is expressly covered by the Insurance Contracts Act (Derrington S (2002) Australia: Perspectives and Permutations on the Law of Marine Insurance, Ch. 11 In Thomas R (ed) The Modern Law of Marine Insurance, Vol. 2, LLP).

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  148. Until the legislature intervened, gambling and wagering contracts were not prohibited by English law, so that a wager as such was not an illegal agreement and was justifiable in a court. The same principle was also applied to wagers concerning marine insurance, namely if the parties chose to make a wager in the form of a marine policy, the court enforced the contract. It is shown in a few early cases that the courts had the tendency to cancel policies on proof of no interest ( Martin v Sitwell (1691) 1 Shaw. 156; Goddart v Garrett (1692)2 Vern.269; Le Pypre v Farr (1716)2 Vern.716; Whittingham v Thornburgh (1690)2 Vern. 206) It is clear, however, from later decisions that wager policies were recognised as valid if it was clear that both parties really intended to wager and not to conclude an insurance contract to indemnify the assured for a real loss [Lucena v Craufurd (1802) 3 Bos. & Pul. 75,101]. In the modern era, the Marine Insurance Act 1906 defines in section 4(1) that wagering contracts are void and in section 4(2) which contracts are to be defines as wagers, i.e. those made without interest and without expectation of acquiring interest in the subject-matter, as well as “p.p.i.” policies. The Act does not prohibit such contracts and thus does not make them illegal as void (Legh-Jones N et al (2002) MacGillivray on Insurance Law, 10th edn, London, S&M, Ch 1).

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  149. That in turn, as Lawrence J. recognised in Lucena v Craufurd, (1806) 2 Bos & Pul (NR) 269 involves a satisfactory degree of certainty that, had the insured property not been lost or damaged, the assured would have benefited, and English law has adopted the requirement of a legal relationship between the assured and the insured subject-matter as the criterion for that degree of certainty.

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© 2007 Springer-Verlag Berlin Heidelberg

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(2007). Indemnity marine insurance contracts: basic features and cover provided. In: The Principle of Indemnity in Marine Insurance Contracts. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-49074-6_2

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