marine insurance law · insurance assured insurance contract right to compensation co-insured, ch....

1

Marine insurance law

ProfessorTrine-Lise WilhelmsenScandinavian Institute of

Maritime Law

Outlineo The main types of marine insuranceo The legal sources in marine insurance (in

general)o The insurance contract (NP)o Insurable interest, insurable value and

the sum insured (NP)o Scope of cover (NP)o Duty of disclosure and due care (NP)Fall 2014 Marine insurance 2

2

1 The main types of marine insurance

o Insurance related to shipso Insurance of goods under transporto Some other distinctions

Fall 2014 Marine insurance 3

1.1 Insurance related to shipso Three main insurances:

o Hull insuranceo Loss of incomeo Liability

o The main difference:o What interests are insuredo Calculation of compensation


3

Insurance related to ships


1.1.1 Hull insurance o Damage to/loss of propertyo Element of liabilityo Element of loss of incomeo Divided into two:

o Hull insuranceo Hull interest insurance: only total loss and

liability


4

1.1.2 Loss of income o The covered interest: income derived

from the ship: o Different types:

o Loss of hire: only if the ship is damaged o But also some cover under hull insurance

o Freight interest: only if the ship is a total loss


1.1.3 Liability insuranceso Covering ship-owners’ third party

liabilityo Main liability insurance: P&I insuranceo Hull/hull interest insurance cover part

of the collision liability


5

Insurance related to goods


1.2 Insurance of goods under transport

o Covers cargo under transport from A to B (normally seller to buyer)

o Casualty (damage and loss) insuranceo Includes owner’s profito But not

o Loss of income in generalo Owner’s liability


6

1.3 Some other distinctions of relevance

o Marine/civil risks vs war riskso Two different insuranceso General division

o Primary insurance – coverage for costs of saving actso Primary insurance: coverage of casualtieso Costs of saving acts: covers exspenses


2 The legal sourceso Insurance Contract Act (ICA) 1989o The Nordic Marine Insurance Plan (NP)

2013o The Norwegian Cargo Clauses (CICG)

2004o The Gard and Skuld P&I conditions 2011


7

2.1 Insurance Contract Act (ICA) 1989

o Starting point: Mandatory, § 1-3o But:

o Insurance of registered ships, § 1-3 (c)o Insurance of cargo under an international

transport, § 1-3 (e)o In practice: All cargo insurances follow

the rules in ICA, with certain exceptions


2.2 Nordic Marine Insurance Plan (NP) 2013

o Standard contract (Agreed document)o Developed over 135 yearso By Interested parties from both sideso Covers most of the relevant insurances

for a shipowner (not P&I)o Extensive preparatory documents o Updated every third year (new versions)o Departs from ICA


8


2.3 Norwegian Cargo Clauses (CICG) 2004

o Conditions relating to insurance for the carriage of goods (CICG)

o Many of the same characteristics as NPo But:

o Less extensive commentarieso A stronger tie to the ICA


9

2.4 The P&I Conditionso Included in NMIP 1964, but not in

NMIP 1996 or NP 2013o Today: Each P&I club has its own

conditions (in Norway: Gard and Skuld, in Sweden: The Swedish Club)

o The most important clubs members of The International Group


3. The insurance contracto The parties to the insurance contract

o Definitions, NP Cl 1-1o The insurerso The person effecting the insuranceo The assured

o The insurero Coinsurance /claims leader (NP ch 9)o Reinsurance

o The assured: third party interest


10


The parties to the contract

Insurer

Person effecting the insurance The assured

Insurance contract Right to compensation


Policy holder and the assured

Insurer

Person effecting the insurance The assured

Insurance contract Right to

Compensation

11

Co insurance → Partial insurance with more than one insurer


Ship 600 mill NOK

Insurer A200 mill NOK

Insurer B200 mill NOK

Insurer C200 mill NOK

1/3

1/3

1/3

Reinsurance→ The insurer reinsures the risk undertaken under the direct insurance

contract.


Ship:600 mill NOK

Insurer:100 mill NOK

Reinsurer:500 mill NOK

Direct insurance: 100 %

Reinsurance: 500 mill NOK

12

Insurance of third party interest, NP


Insurer

Person effecting Insurance

Assured

Insurance contract

Right to compensation

Co-insured, Ch. 7 and 8

The insurance contracto Concluding the marine insurance

contracto NP Cl 1-2: Written proof of insurance o The use of a broker: NP Cl 1-3

o Jurisdiction /choice of law NP Cl 1-4o Nordic jurisdiction unless foreign claims

leadero Nordic background law


13

4. Insurable value and the sum insured

o Insurable value: o Starting point: What is the value of the

interesto Open insurable value, Cl 2-2o Assessed insurable value, Cl 2-3

o Sum insured o Starting point: Which sum is choseno Three times the sum insured, Cl 4-18


5. Scope of cover o Terminologyo Perils insured against in marine

insuranceo The losses coveredo Causation


14


Losses covered

Damage

Total loss

Collision liability

Loss of time

Etc

Perils insured

Heavy weather

Theft

Leakage

Fire

Etc

Causation

Terminology

Causation

The casualty

5 Scope of covero Perils insured against; Marine perils

o All risks principle: NP Cl 2-8o Exceptions:

o War perils, NP Cl 2-8 (a)o Intervention by state power, Cl 2-8 (b)o Insolvency, Cl 2-8 (c)o RACE II, Cl 2-8 (d)


15

5 Scope of cover o War insurance, NMIP Cl 2-9

o Named perils principle: o War or warlike conditionso Capture/confiscation etco Riots, strikes, sabotage, terrorism etco Piracy and mutiny

o Common exceptions, see above


5 Scope of cover o Losses covered: Few general rules o Causation – combination of causes, NP

o Cl 2-13: The main ruleo Cl 2-14: Combination of war and marine

perilso Cl 2-11: Combination of perils over

different insurance periods


16

The main rule, NP Cl 2-13o If the loss has been caused by a combination

of different perils, and one or more of these perils are not covered by the insurance, the loss shall be apportioned over the individual perils according to the influence each of them must be assumed to have had on the occurrence and extent of the loss, and the insurer shall only be liable for that part of the loss which is attributable to the perils covered by the insurance.


Combination of marine and waro If the loss has been caused by a combination

of marine perils, cf. Cl 2-8, and war perils, cf. Cl 2-9, the whole loss shall be deemed to have been caused by the class of perils which was the dominant cause. If neither of the classes of perils is considered dominant, both shall be deemed to have had equal influence on the occurrence and extent of the loss.


17

NP Cl 2-11, sub clause 1

The insurer is liable for loss occurred when the interest insured is struck by an insured peril during the insurance period.


Cl. 2-11 sub clause 2 and 3o If an unknown defect results in damage to the

insured vessel, the defect shall be deemed to be a marine peril that strikes the interest insured at the time the damage starts to develop.

o If unknown damage in one part of the vessel results in damage to another part or parts of the vessel, the original damage shall be deemed to be a marine peril that strikes the interest insured at the time the damage to the other part or parts starts to develop.


18

6 Duty of disclosure and due care o Duty of disclosure, NP Cl 3-1 ff

o The extent: Active o The time: When entering the contracto Who: the person effecting the insurance

o Sanction in case of breach depends ono Degree of faulto Causation


6. Duty of disclosure and due care o Alteration of risk,

o General regulation, NP Cl 3-8 to 3-13o Conforms as a main rule to § 3-1 ffo Less practical significance

o Special regulation, Cl 3-14 to § 3-21.o Loss of classo Trading areao Illegal entityo Change of ownership


19

6. Duty of disclosure and due care

o Safety regulation, NP Cl 3-22, Cl 3-25 o The concepto Knowledgeo Causationo Burden of proofo Special regulation


6 Duties of disclosure and due care

o Casualties caused by the assuredo Deliberation

o No liability, Cl 3-32o Cancellation, Cl 3-34

o Gross negligenceo Cl 3-33, reduction of liabilityo Cancellation, Cl 3-34

o Ordinary negligence, full liabilityo Notification and salvage measures


20

8 Identification, Overview o The issue of identificationo The need for rules o The problems:

o the person effecting insurance and his helpers

o the assured and his helperso the assured and the person effecting the

insuranceo the assured and co-insured/co-owner


Identification between person effecting the insurance and his helpers


The person effecting ins.

Broker/Agent

The insurer

Identification

No liability

breach of the duty of disclosure

21

BETWEEN THE ASSURED AND HIS HELPERS


Assured

Helper as defined Cl 36.2

Insurer

Identification

No liability

Breach of duty of due care

THE ASSURED AND HIS HELPERS


Assured

Master/crew, Cl 36, 1

Insurer

No Identification

Liability


22

Assured and co assured/co owner


Assured

Co-assuredCo-owner

Insurer

No Identification

Liability


Assured and co assured/co owner


Assured

Co-assuredCo-owner

Insurer

Identification

No Liability


If overall decision authority

23

the assured and the person effecting insurance


Assured

Person effecting insurance

Insurer

Identification

No liability

Breach of duty of disclosure

marine insurance law · insurance assured insurance contract right to compensation co-insured, ch....

Documents