Marine Insurance 03.08.2024.pdf

APARNA M. N. TILAKARATNE MBA (UK), ATTORNEY-AT-LAW CHIEF LAW OFFICER – SRI LANKA PORTS AUTHORITY  Marine Insurance Type of insurance designed to provide coverage for the transportation of goods from one point of origin to another, either on the ocean or by land as well a...

APARNA M. N. TILAKARATNE MBA (UK), ATTORNEY-AT-LAW CHIEF LAW OFFICER – SRI LANKA PORTS AUTHORITY  Marine Insurance Type of insurance designed to provide coverage for the transportation of goods from one point of origin to another, either on the ocean or by land as well as damage to the waterborne instrument of conveyance and to the liability for third parties arising out of the process. Fundamental Principles of Contract of Marine Insurance: a) Indemnity b) Insurable Interest c) Utmost Good Faith d) Proximate Cause e) Subrogation and Contribution.  The different types of MARINE Insurance POLICIES Marine Cargo Insurance Covers the loss or damages caused to marine cargo during the transit. Protects the cargo owner against damage or loss of cargo due to ship accident or due to delay in the voyage or unloading. Has third-party liability covering the damage to the port, ship or other transport forms (rail or truck) resulted from the dangerous cargo carried by them. Liability Insurance Covers where compensation is sought to be provided to any liability occurring on account of a ship crashing or colliding and on account of any other induced attacks. Hull Insurance Covers any type of danger. The ship may be insured for a particular trip or for a particular period. Mainly caters to the torso and hull of the vessel along with all the articles and pieces of furniture on the ship. Mostly taken out by the owner of the ship to avoid any loss to the vessel in case of any mishaps occurring. Freight Insurance Covers merchant vessels’ corporations which stand a chance of losing money in the form of freight in case the cargo is lost due to the ship meeting with an accident. Freight, Demurrage & Provides claims for handling assistance and legal costs for a wide range Defence (FD&D Insurance) of disputes which are not covered under H&M or P&I insurance. Machinery Insurance: All the essential machinery are covered under this insurance and in case of any operational damages, claims can be compensated (post- survey and approval by the surveyor). Hull & Machinery (H&M) Can be extended to cover war risk covers and strike cover (strike in Insurance port may lead to delay and increase in costs. Protection & Indemnity Provided by the P&I Club which is ship owners mutual insurance (P&I) Insurance covering the liabilities to the third party and risks which are not covered elsewhere in standard H & M and other policies. Risks that are connected with ownership of the vessel. Risks that are related to the hiring of the ship. E.g. Cargo-related claims. Voyage Policy Policy which is valid for a particular voyage. Time Policy Policy which is valid for a specified time period. Mixed Policy policy which offers a client the benefit of both time and voyage policy. Open/ Unvalued Policy Value of the cargo and consignment is not put down in the policy beforehand. Therefore reimbursement is done only after the loss of the cargo and consignment is inspected and valued. Valued Policy Opposite of an open marine insurance policy. Value of the cargo and consignment is ascertained and is mentioned in the policy. Port Risk Policy Policy is taken out in order to ensure the safety of the ship while it is stationed in a port. Wager Policy Policy where there are no fixed terms for reimbursements mentioned. Floating Policy Policy where only the amount of claim is specified and all other details are omitted till the time the ship embarks on its journey,. Single Vessel Policy: Suitable for small ship owner having only one ship or having one ship in different fleets. It covers the risk of one vessel of the insured. Fleet Policy Several ships belonging to one owner are insured under the same policy. Block Policy Protects the cargo owner against damage or loss of cargo in all modes of transport through which his/her cargo is carried i.e. covering all the risks of rail, road, and sea transport.  Types of freight claims Freight Claim is defined as a legal demand submitted by a shipper or a third-party logistics provider (3PL) on their behalf to a carrier for financial reimbursement on the loss or damage of a shipment. Type of freight claim types shipping claims cargo claims transportation claims loss and damage claims The intent of a freight claim is to have the carrier resolve the matter to the point that the initial terms noted on the Bill of Lading has been fulfilled. A freight claim recovers loss, but lost profits will not be reimbursed.  Most common freight claims that shippers file: - Damage Freight Claims - Part or all of a load has been damaged to the extent that its value is affected - Loss Freight Claims - This occurs when an entire order has been lost and is not delivered as intended. - Shortage Freight Claim - Claims occurred when the Multiple pieces were missing from an order, thus creating a shortage compelling the recipient to deny denies acceptance of an entire order. - Concealed damage or Shortage Freight Claim - The damage or missing components not apparent until final unboxing and inspection - Refused Claim — Claims occurred when the recipient denies acceptance of an entire order.  Cargo Claims Cargo Claim - A demand for monetary compensation in respect of financial loss sustained as a result of a breach of the contract of carriage or a failure by the carrier to fulfill certain extra-contractual obligations. Types of cargo claims 1) Damaged Claim 2) Concealed Damaged Claim 3) Shortage Claim 4) Concealed Shortage Claim 5) Refused Claim 6) Loss Claim Marine cargo insurance typically pays for damages caused by: a) Natural disasters b) Collisions c) Acts of war d) Piracy e) Cargo abandonment f) Customs rejection  Most Critical Cargo Claims Documents 1. Transportation Documents: These documents contain the core details of the movement of the goods, such as the shipper and carrier information, commodity shipped, quantity, and shipping terms. - Bill of lading - Airway bill of lading - Ocean bill of lading - Truck bill 2. Delivery Documentation: These documents are used to show proof of delivery to the final recipient - the consignee. - Signed delivery receipt (POD) - Drop trailer receipt - Receiving sheet 3. Statement of Claim: The purpose of the statement of claim is to clearly define the details of the loss, including the commodity damaged, the extent of damage, and the value of the damage. - Itemization of the claim - Explanation of the claim circumstances 4. Value Verification: This serves as supporting evidence of the value of the damaged or lost goods. - Commercial invoice - Sales contract/bill of sale - Screenshot of internal accounting page, if no invoice 5. Photos: If goods are damaged in transit, whether partially or in total, the freight carrier will likely require photos of the damaged product. When taking the photos, it is helpful to get close-up shots of the damage, as well as photos from a distance. In addition to the above documents, the following information may be requested and should be made available to help expedite the claims process: Quality Assessment Report Temperature Monitoring Report Police Report or Accident Report Repair Quote Proof of Disposal  Hull & Machinery Insurance arrangements Hull Insurance Policy provides complete protection to the hull and machinery of ocean- going and other vessels operating along waterways from damage due to perils such as : – Fire - Explosions - Theft by outside – Jettison - Earthquake, volcanic eruption or lightning – Bursting of boilers, breakage of shafts or any latent defect in the hull and / or machinery – Accidents during loading, discharging or shifting of cargo / fuel – Negligence of master officers, crew and pilot – War, Strikes, Riots & Civil Commotion risks & Terrorism. The ship may be insured for a particular trip or for a particular period. Mainly caters to the torso and hull of the vessel along with all the articles and pieces of furniture on the ship. Taken out by the owner of the ship to avoid any loss to the vessel in case of any mishaps occurring. Types of Hull & Machinery Insurance – Operational cover - Total loss & partial loss – Voyage cover - Total loss & partial loss – Ship builders risks – Ship repairer’s liability – Protection and indemnity liability – Pleasure craft cover  Advantages of Marine Hull Insurance Comprehensive Coverage – A Marine Hull insurance policy provides complete protection to the hull and machinery of the vessel from loss or damage due to a range of perils like fire, explosion, robbery, collision and other ship-damaging risks. Flexible Plan – Flexibility to buy Marine Hull insurance to protect the hip or yacht either for a specific journey, or to cover the vessel for a specific period of time irrespective of its voyages. Inland Vessels Covered – A Marine Hull insurance policy can cover vessels that use inland waterways, against a wide range of risks such as collision or piracy, and against raising, removal or destruction of wrecks etc. The sinking of a ship can also be covered. Easy Documentation – The sum assured for Hull and Machinery insurance is as per the agreed value, which is equivalent to or approximately the cost of the vessel to be insured.  RULE OF Limitation of liability Traditionally the general rule of law dictated that a successful claimant should be entitled to compensation from the wrongdoer for the entire amount of damage, loss or injury incurred by him. But under the Limited liability Rule, while the owner may in principle be liable, the extent of his liability is lessened by placing a cap on his total exposure. The limited liability rule : “The shipowner's or agent's liability in a marine casualty is merely co-extensive with their interest in their vessel, whereby a total loss of the vessel results in the extinction of liability”. In essence, “no vessel, no liability” defines the limited liability rule. The Convention on Limitation of Liability for Maritime Claims: An IMO treaty that was concluded in London in November 1976., entered into force in 1986 and superseded the 1957 Brussels Convention of the same name.  International conventions governing the general right to limit liability of a shipowner: (1) 1924 International Convention for the Unification of Certain Rules relating to the Limitation of Liability of Owners of Sea-going Vessels and Protocol of Signature (1924 Convention), (2) the International Convention Relating to the Limitation of the Liability of Owners of Sea-going ships, Brussels 1957 (1957 Convention) (3) Convention on Limitation of Liability for Maritime Claims, London 1976 (LLMC) Sri Lankan Perspective : Presently there is no domestic legislation in place in Sri Lanka which provides for or governs global limitation of liability in respect of maritime claims. However, in terms of Section 2 of the Introduction of Law of England Ordinance No. 5 of 1852 (Civil Law Ordinance), which was enacted during the time of British rule, it is provided that the law of England shall be observed in maritime matters, where there is no legal provisions or enactment in force in relation to that matter in Sri Lanka.  Lloyds Open form and salvage arbitrations The Lloyd's Open Form (LOF), formally "Lloyd's Standard Form of Salvage Agreement – No Cure – No Pay” is a standard form contract for a proposed marine salvage operation. Originating in the late 19th century, the form is published by Lyod’s of London Most commonly used form for international salvage. Innovations in the LOF 1980 caused a major change in environmental salvage. Incorporates dispute resolution provisions After a stricken ship accepts an offer of salvage from a salvor, a binding contract is created and parties agree upon the LOF in the interests of certainty of terms. LOF is called "open" because it specifies no particular sum for the salvage job. Salvage is not a "contract for services" but an agreement to provide a service in the hope of a "reward" to be determined later by an arbitration hearing. Value of the ship, its cargo and freight at risk are taken into account in deciding the award, together with the extent of the dangers and the difficulty in effecting the salvage.  Salvage reward has been subject to the salvor successfully saving the ship or cargo, and if neither is saved, the salvor gets nothing, however much time and money has been spent on the project. Lloyd's Open Form (LOF) 1980 made provision for a stricken tanker to engage salvage services and guarantee a reward provided that the salvor had exercised due diligence in attempting to save the marine environment from pollution International maritime industry joined with P&I Clubs in 2000 to develop the new Special Compensation P&I Club Clause, a Codicil which could be annexed to the LOF to redress the shortcomings of the 1989 Convention.  Errors and omissions insurance The purpose of errors and omissions insurance is to protect businesses, professionals, and workers from costs associated with lawsuits and losses a client may suffer due to an error or mistake made in the work produced or advice given. The coverage is designed to pay for legal liability to customers for negligent acts, errors or omissions and defense costs. In shipping industry, the inherent complexity of the supply chain, increased regulation and greater demands and expectations from shippers are in existance and thereore the claims against freight forwarders alleging damages due to an error or mistake are becoming common. Even if an allegation is meritless, the cost of defending against such claims can be significant and therefore E&O Insurance is specifically designed for domestic and international freight forwarders to address the type of professional liability exposures faced in the line of work. E&O coverage is designed to pay for legal liability to customers for negligent acts, errors or omissions and defense costs. THANK YOU !!!!!