© det juridiske fakultet universitetet i oslo eve de coning research fellow phd scandinavian...

© DET JURIDISKE FAKULTET

UNIVERSITETET I OSLO

Eve de Coning

Research fellow PhD

Scandinavian Institute of Maritime Law

October 2007

MARINE INSURANCEMARL16



LECTURE OUTLINEWednesday 17 October

LECTURE 1: ’INTRODUCTION’

1. Marine insurance: an overview

2. Types of marine insurance3. Sources of law

LECTURE 2: ’CONTENT’

4. The marine insurance contract5. Duties imposed on the parties



1. Marine insurance: an overview1. Definition:

a) no definition of the concept ’insurance’b) certain characteristics:

i. transfer of riskii. uncertain eventiii. spreads the lossiv. premium

2. Marine insurance: a) insurance of vesselsb) insurance of cargoc) (liability insurance)



1. Marine insurance: an overview (cont.)

3. Medieaval roots:a) origin of all insuranceb) Roman Law: integral to the maritime loan c) 1227 AD: Pope Gregory IX’s papal see prohibition on maritime loansd) North Italians (Lombardy): indemnity and subrogatione) Lombard street

4. Common roots ?’Marine insurance is a law not peculiar to one, but common to all

commercial nations. Whence it is derived but from natural reasons, existing in all men, and reaching the same results in all countries alike.’

Emerigon’s 17835. Marine insurance market:

a) UK b) Scandinavian and Frenchc) similar (not uniform!) law and different practicesd) attempt at unification by the CMI Singapore, 2001: now abandoned



2. Types of marine insurance

1. Shipowner insurancesa) Hull insurance (H&M insurance) NMIP part two

- property damage insurance- liability insurance in cases of ’collision or striking’

b) Total loss insurances NMIP chapter 14- hull interest insurance- freight interest insurance

c) War insurance NMIP chapter 15- war perils (§2-9) and, if vessel temporarily seized,

marine perils (§15-1 read with §§ 3-19 and 2-8)d) Loss of hire insurance NMIP chapter 16

- loss of hire during ’off hire’- all types of contracts of affreightment- compensates lack of income



2. Types of marine insurance (cont.)2. Protection and Indemnity (P&I) Insurance (international rules)

- mutual insurance - organised in ’clubs’ or mutual associations- the largest clubs are in the ’International Group’

3. Cargo Insurance - covers total loss, shortage and damage to cargo CICG § 6- includes also measures to avert or minimise loss CISG § 6:

- salvage charges- general average contributions- litigation charges etc

- does not include general economic loss or third party liability.



3. Sources of law1. Legislation

a) Until 1930: The Maritime Code (MC)b) From 1930: The Insurance Contract Act (ICA)

- limited relevance- marine insurance plans more important

c) Currently:i. The Inurance Contract Act of 16 June 1989 no. 69

- mainly non-mandatory application to marine insurance (ICA § 1-3 litra (c) and litra (e))

- but if mandatory, the insurance conditions take account of ICA

ii. ICA suplemented by- plans- rules- conditions



3. Sources of law (cont.)

2. Marine insurance plans- most important legal source in Norway- an agreed document- currently two plans:

a) Norwegian Marine Insurance Plan (NMIP 1996 version 2007)

b) Conditions relating to Insurance for the Carriage of Goods (CICG 1995 version 2004)

3. P&I - rules- each club has own rules that the shipowner contracts to- no uniformity, but great similarity



3. Sources of law (cont.)

UK market:1. Statute: Chalmer’s Marine Insurance Act of 19062. Major standard insurance policies are prepared by the

International Underwriting Association (IUA) of London3. These prepare the ’Institute Clauses’

a) Institute Time Clauses – Hullsb) Institute Voyage Clauses – Hullsc) Institute Cargo Clauses (A) d) Institute Cargo Clauses (B)e) Institute Cargo Clauses (C)f) Institute Time Clauses (freight)g) Institute Voyage Clauses (freight)



4. The marine insurance contract:a) Parties

The parties to the insurance contracta) ’person effecting the insurance’ NMIP § 1-1 litra (b)b) ’assured’ NMIP § 1-1 litra (c)c) ’co-assured’ NMIP chapters 7 and 8, CICG § 9d) ’insurer’ NMIP § 1-1 litra (a) or ’company’ CICG/ICA e) ’co-insurer’ and ’claims leader’ NMIP chapter 9



4. The marine insurance contract:b) Formation

1. The insurance contracta) ordinary contract law applies - if broker NMIP § 1-3 provides particular rulesb) documentation

- shipowner insurancea) insurance policy NMIP § 1-2

- passivity is approval NMIP § 1-2 - cargo insurance

a) single shipment: insurance certificate ICA § 2-2 = insurance

document in terms of CICG § 1 no. 4 b) multiple shipments, ie period insurance:period (open cover and floating) insurance

certificate (CICG annex § 4 and § 5) and single shipment insurance certificate (ie insurance document) will be issued



4. The marine insurance contract:c) Interest insured

1. ’Insurable interest’

a) ’economic interest’

b) terminology abandoned by ICA and CICG, but retained by NMIP

c) lawful?

2. ’Insurable value’

a) the value of the interest at the inception of the insurance NMIP § 2-2 and CICG § 29

b) cargo insurance: includes certain expenses and 10% profit CICG § 29

c) shipowner insurance: assessment NMIP § 2-3

3. ’Sum insured’

a) the elected sum insured in terms of which premiums are paid

b) over and under insurance



4. The marine insurance contract:d) Cover

1. Perils insured- starting point: ’all risk’ NMIP § 2-8 and CICG § 3- also: ’named peril’ CICG § 4 and § 5- h/e exceptions:

- war risks NMIP 2-8 litra (a) and CICG § 18 no. 6- intervention by a State power NMIP 2-8 litra (b) and

CICG § 18 no. 7- nuclear/radioactive contamination: RACE II – clauseNMIP § 2-8 litra (d) and CICG § 18 nos. 3 and 11



4. The marine insurance contract:d) Cover (cont.)

2. Causation - ’peril struck’ principle NMIP § 2-11 and CICG § 7- multiple causes:

- ’dominant cause’?- ’apportionment’ principle NMIP § 2-13 and CICG § 20- exceptions:

- ’dominant cause’ when marine and war peril NMIP § 2-14

- nuclear contamination: entire loss attributed this peril NMIP § 2-13 and CICG § 20- multiple insurance periods:

- ’apportionment’ principle? ND 1950.458 NSC HEKTOR- ’Anti-Hektor’ clause NMIP § 2-11



5. Duties imposed on the parties: overview

1. Imposed on who?- both person effecting insurance/assured and insurer, but mainly former- problem of identification

2. Duties imposed NMIP chapter 3a) Rules of disclosure:

- disclosure information material to the evaluation of risk- disclose information of significance to the alteration of

riskb) Central duties of care:

- avoid causing damage- uphold safety regulations (NB! no-longer seaworthiness)- notify of and avert/minimise loss



5. Duties imposed on the parties: Identification

1. Imputation or attribution of conduct2. Four scenarios:

a) person effecting insurance and his representatives- not regulated in ICA, NMIP or CICG- contract law principles: identification of representative, ie broker

b) assured and his representativesNMIP:

- act of persons with authority and management functions in areas of material importance for the insurance NMIP § 3-36

- not fault of Master or crew in ’service as seamen’ NMIP § 3-36

- exception:- breach of safety regulations in contract is attributed to assured NMIP § 3-25


UNIVERSITETET I OSLO5. Duties imposed on the parties:

identification (cont.)CICG:

- based on persons position (at management level) and function (responsible for transport of insured goods) CICG § 10c) assured and the person effecting insurance NMIP:

- regardless of whether conduct by person effecting insurance or representative NMIP § 3-38

CICG:- similar to NMIP, but also includes previous owner

CICG §10 - exceptions CICG § 11 no. 3

d) between co-assuredNMIP:

- no identification, unless overall decision-making authority NMIP § 3-37

CICG:- not covered in CICG § 10 and § 11, however

ICA § 7-3



5. Duties imposed on the parties: a) Rules of disclosurei. Duty of disclosure

1. When contract is being concluded2. Information about risk

a) active duty NMIP § 3-1b) passive duty CICG § 12

3. Not information about new circumstances, however notification duty if aware of incorrect or incomplete information

4. Sanctions depends on blame (fraudulent, blameworthy and innocent conduct)



5. Duties imposed on the parties: a) Rules of disclosureii. Alteration of risk

1. Change in circumstances which alters risk after insurance effected NMIP § 3-8 to § 3-21, ICA § 4-5 and § 4-6

2. General rules NMIP § 3-8 to 3-113. Specific rules:

a) loss of class or change of classification society NMIP § 3-14b) excluded trading area NMIP § 3-15c) illegal purpose NMIP § 3-16



5. Duties imposed on the parties:b) Central duties of carei. Avoid causing damage

1. Covered in NMIP § 3-32 to § 3-35 and ICA § 4-92. Compensation depends on assured’s level of fault

a) intentional conduct (eg scuttling): no compensation NMIP § 3-32 and ICA § 4-9b) grossly negligent conduct: reduced compensation NMIP § 3-33 and ICA § 4-9c) ordinary negligent conduct: full compensation NMIP (by implication) and ICA § 4-9

- unless breach of safety regulation



5. Duties imposed on the parties:b) Central duties of care

ii. Uphold safety regulations1. ’A rule concerning measures for the prevention of loss’2. Which safety regulations?

a) NMIP § 3-22 to § 3-27 - issued by public authority,- stipulated in insurance contract,- prescribed by the insurer, or - issued by the classification society (including periodic

surveys)b) CICG § 21 - § 24

- domestic trade: safety regulations in § 22 - § 24 and insurance certificate

- international trade: also those issued by public authorityc) P&I Insurance

- often stipulated specific safety regulations




ii. Uphold safety regulations (cont.)3. Consequence upon breach

NMIP § 3-25:a) insurer is not liableb) unless:

- no causation, or- no culpable conduct

CICG § 21:International trade = NMIP

(Domestic trade: ICA § 4-8 – special rules)




iii. Notify of and avert/minimise loss

1. Loss is imminent or has occured2. Duties:

a) inform the insurer NMIP § 3-29 and CICG § 25b) reasonable measures to avert or minimise loss NMIP § 3-30 and CICG § 25

3. Breacha) Intention or gross negligence: compensate damage which would have happened regardless NMIP § 3-31 and CICG § 26 b) Domestic transport: discretionary evaluation ICA § 4-10



Further reference

The international maritime committee – Comite Maritime International (CMI):www.comitemaritime.org

The Australian Law Reform Commission’s report on marine insurance:ALRC 91: Review of the Marine Insurance Act 1909 (Cth) (2001)Available at http://www.alrc.gov.au/inquiries/title/alrc91/index.htm

Marine insurance in an international context, see:Wilhelmsen ’Duty of Disclosure, Duty of Good Faith, Alteration of Risk and

Warranties: An analysis of the Replies to the CMI Questionnaire’ CMI Yearbook 2000 at 332

Available at http://www.comitemaritime.org/singapore/marinsurance/wilhemsen.pdf

© det juridiske fakultet universitetet i oslo eve de coning research fellow phd scandinavian...

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