Ocean Marine Insurance

Fast Facts

• Hull Insurance: Protects ship owner against loss to the vessel.
• Cargo Insurance: Covers cargo loss during transport on a ship.
• Freight Insurance: Reimburses cargo owners for shipping charges if voyage is incomplete.

Note: Originally, marine insurance meant ocean marine, but inland marine developed in the 1920s for land-based transport, leading to the term "ocean marine" for traditional coverage.

Hull Insurance

Protects ship owners against loss to the vessel (not cargo), similar to auto collision insurance.

Key Policy Provisions

• Assured: The insured party in the policy.
• Agreed Value: Vessel’s value agreed by insured and insurer, may differ from insured amount.
• Deductible Average Clause: Excludes partial losses under 3% of policy limit. Partial loss is called a "particular average."
Example: Policy may state "free of particular average under 3%."
• Premium: If premium is 30+ days late, insurer may cancel after 10 days’ notice. Earned premium retained; unearned returned if policy is canceled.
Key Point: Total loss means full annual premium is earned, regardless of when loss occurs.
• Adventure Clause: Requires insured to detail voyage in policy declarations.
• Perils Clause: Covers "perils of the sea" (e.g., heavy weather, gale winds) and additional perils (e.g., boiler explosions) via Inchmaree clause.
Key Point: Perils of the sea (e.g., storms) differ from perils on the sea (e.g., fire).
• Claims: Assured must report loss; insurer can inspect damage and choose repair location.
• General Average: Losses for common good (e.g., jettisoned cargo) shared by all parties.
Example: If cargo is jettisoned to save ship, all parties share loss based on venture value.
• Salvage Charges: Expenses paid to third-party salvors assisting in saving property.
• Sue and Labor Clause: Obligates assured to prevent further loss; insurer pays related costs, even if total loss occurs.
• Collision Liability (Running Down Clause): Covers property damage to another ship/cargo from collision, but not bodily injury or damage to piers.
• Pilotage and Towage: Insurer pays collision damages only if vessel owner is liable for pilot/tugboat actions.
• Change of Ownership: Coverage ends if ownership changes, unless ship is underway, then deferred until arrival in port.
• War, Strikes, Exclusions: Excludes riots, terrorism, vandalism, and war-related perils.

Cargo and Freight Insurance

Cargo: Goods on ship, susceptible to theft, water damage, or handling damage.

Freight: Charges for carrying cargo, usually included in cargo’s insured value, but available separately.

Types of Cargo Losses

• Total Loss:
  • Actual Total Loss: Cargo entirely lost or has no value.
  • Constructive Total Loss: Salvage costs exceed cargo’s salvaged value.
• Partial Loss (Particular Average): Affects one party’s cargo, borne by its owner.
Key Point: General average losses are shared; particular average losses are not.
• Sue and Labor: Insurer pays costs to save cargo, plus total loss and salvage charges if applicable.

Freight Insurance

Covers shipping charges lost if voyage is incomplete. Usually part of cargo value but can be a separate policy.

For Your Review

• Hull insurance covers ship, not cargo, like auto collision coverage.
• Perils of the sea include extraordinary weather; Inchmaree clause adds perils like boiler explosions.
• General average losses are shared; particular average is a partial loss to one party.
• Salvage charges are paid to third-party salvors assisting in saving property.
• Sue and labor clause requires saving damaged property; insurer pays costs, even for total loss.
• Freight is the charge for carrying goods, usually included in cargo value, but available separately.