Handbook of ship calculations, construction and operation

A contract of marine insurance is a contract of indemnity whereby the insurer undertakes to indemnify the insured, in the manner and to the extent agreed, against marine losses, that is, the losses incident to marine adventure. Unless specially mentioned in the policy, goods are not insured until they are on board the vessel which is to carry them. The following section contains abstracts from Sea Insurance by W. Gow.

Insurable Value.  Where no special contract is made between the insured and the underwriter the insurable value of certain matters of insurance is fixed by law as follows:

(1) Ship. — Her value at the commencement of the risk including outfit, provisions, stores, advances of wages, and any other outlays expended to make the ship fit for voyage or the period of navigation covered, plus the cost of insurance upon the whole.

The insurable value in the case of a steamship includes the machinery, boilers, coal, and engine stores if owned by the insured, and in the case of a ship engaged in a special trade, the ordinary fittings for that trade. Note that the policy on hull and machinery does not cover coal and stores.

(2) Freight. - Whether paid in advance or otherwise, the insurable value in the gross amount of the freight at the risk of the insured, plus the charges of insurance.

(3) Goods or Merchandise. - The insurable value is the prime cost plus expenses of and incidental to shipping and cost of insurance.

Terms

The term ship includes the hull, materials, and outfit, stores, and provisions for the officers and crew, and in the case of vessels engaged in a special trade, the ordinary fittings requisite for the trade, and also, in the case of a steamship, the machinery, boilers, coal, and engine stores if owned by the insured.

Freight includes the profit derivable by a shipowner from the employment of his ship to carry his own goods, as well as freight payable by a third party, but does not include passage money.

Goods includes goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board. In the absence of any usage to the contrary, deck cargo and living animals must be insured specifically and not under the general heading goods.

Policies. - The intending insured (principal or broker) offers the risk by showing to the underwriter a brief description of the venture, called in Great Britain a "slip" and in America an "application." The underwriter signifies his acceptance of the whole or of a part of the value exposed to perils of the sea by signing the slip, and putting down the amount for which he accepts liability. From this slip is worked up the complete contract or policy.

The following five paragraphs must be specified in a marine policy:

1. The name of the insured or of some person effecting the insurance on his behalf.

2. The risk covered, that is, both the subject matter insured and the perils insured against.

3. The voyage covered or, in case of time insurance, the period of time during which the protection of the policy is to last, or if it is intended to cover not only a voyage but also a period of time, or a period of time succeeded by a voyage, then both must be distinctly specified.

4. The sum or sums insured,

5. The name or names of the underwriters.

Unless the policy otherwise provides, the insurer on ship or cargo is not liable for

Any loss proximately covered by delay, although the delay may be caused by a peril insured against;

Ordinary wear and tear;

Ordinary leakage and breakage;

Inherent vice or nature of the subject matter insured, i. e., as fruit rotting, meat becoming putrid, or flour heating not from external damage but solely from internal combustion.

The term "thieves" does not cover clandestine theft or a theft committed by one of the ship's company, whether crew or passengers.

Where goods are insured until they are safely landed, they must be landed in the customary manner, and within a reasonable time after arrival at the port of discharge, and if they are not so landed the risk ceases.

"Perils of the sea" refers only to fortuitous accidents or casualties of the sea. The damage caused by springing a leak is not a charge on the underwriters unless it be directly traceable to some fortuitous occurrence.

Where the leak arises from the unseaworthy state of the ship when she sailed, or from wear and tear or natural decay, and is only in consequence of that ordinary amount of straining to which she would unavoidably be exposed in the general and average course of the voyage insured, the underwriter is not liable.

A clause is often inserted in a policy admitting the seaworthiness of this vessel for the purpose of the insurance. Where this is attached to a policy, it is a concession on the part of the underwriter that any leak arising must be from a peril of the sea.

The term "All other perils" includes only perils similar in kind to those insured against.

All risks of war are eliminated from the marine coverage, but this may be had separately with or without marine coverage. A marine coverage may be secured to protect any insurable hazard, but it is decidedly in order for the insurer to realize what risks he retains and what risks are covered by his contract.

There are different kinds of policies as:

Voyage Policy, in which the subject matter is insured at and from, or merely from one place to another place or places.

Time Policy, where the subject matter is insured for a period of time definitely specified.

Valued Policy, one which specifies the agreed value of the subject matter insured.

Unvalued Policy, one which is open to the insured to insure for a definite sum his interest in the subject matter of the policy without stating any value attributed by him to the subject matter.

Floating Policy describes the insurance in general terms and leaves the ship or ships and other particulars to be defined by subsequent declaration.

Clauses and Terms Occurring in Policies

General Average (G. A.). - Suppose a vessel springs a leak, and to save her from sinking the captain throws overboard a portion of her cargo. The last shipment loaded is generally the first to come out.

If the shipment is fully insured the underwriters will pay the amount assessed against the goods, but whether the goods are insured or not the general average will make good to the owner the value of the goods which were jettisoned less the assessment which the owner is called upon to pay. It is safe to figure that all policies of insurance on goods cover and protect the merchant against assessments in general average.

A sacrifice to protect the ship alone or the cargo alone is not covered by general average. It is the opposite of an accidental loss caused by a maritime peril. A loss caused by water to extinguish a fire is general average, but not to the packages which themselves were on fire.

Particular Average (P. A.) - A particular average loss is a partial loss of the subject matter insured, caused by a peril insured against, and which is not a general average loss. Particular average, instead of being contributed for the general body of those who are interested in the adventure, falls entirely upon the owner of the property deteriorated by the damage.

Particular Charges. - Expenses incurred by or on behalf of the insured for the safety or preservation of the subject matter insured, other than general average and salvage charges, are called particular charges. Particular charges are not included in general average or particular average. They are covered in the policy by permission granted to sue, labor and travel in and about the defense, safeguard and recovery of the goods.