MARINE INSURANCE

 A contract of Marine insurance can be defined as a contract whereby one party, for an agreed
consideration, undertakes to indemnify the other against loss arising from certain perils and sea risks to
which a shipment, merchandised and other interests in a marine adventure may be exposed during a
certain voyage or a certain period. In Lloyd v. Fleming, Blackburn J defined a policy of marine insurance
as a 'contract of indemnity against all losses occurring to the subject matter of the policy from certain
perils during the adventure'. Marine insurance contract may also be defined as a contract by which the
insurer promises to compensate the insured for all losses incidental to marine adventure that may be
sustained by the subject matter insured. The insured undertakes to pay a certain sum of money called the
premium in consideration of the insurer’s guarantee to make good the losses. According to Section 3,
Marine Insurance Act, 1963, a contract of marine insurance is a contract whereby the insurer/undertakes to
indemnify the assured in the manner and the extent thereby agreed, against marine losses, that is to say,
the losses incidental to a marine adventure.
 SUBJECT MATTER OF MARINE INSURANCE:
 The statute states that every lawful marine adventure may be the subject matter of a contract of marine
insurance. Thus, a ship being used for smuggling or for piracy cannot be the subject matter of a contract of
marine insurance, as it is not on a lawful marine adventure. The insurance of property in marine insurance
may be divided into four broad categories: (1) Hull, (2) Cargo, (3) Freight, (4) Liability
 (1) Hull- Hull or vessel is a valuable asset in the voyage that carries cargo from one destination to another.
Hull Insurance refers to the insurance of the actual ship or vessel and its machinery, as it moves from one
port to another and is subject to the marine risks or perils of the sea. These policies are normally taken on
an annual basis and cover all perils of the sea.
 (2) Cargo- Cargo insurance covers "goods carried in a ship" or "merchandise carried by the ship". In other
words, when the goods or cargo to be carried from the port of departure to the port of destination form the
subject matter of insurance, it is called cargo insurance. Cargo insurance policies may be arranged for the
duration of a voyage, as time policies, open policies, or on other bases. It may be written under a single
risk policy or a floating policy. The cargo may be of any description, for wares, merchandise, property,
goods, etc.
 (3) Freight- The term 'freight' means payment received for the transportation of goods. It is exactly
equivalent in its field to the use of the word "fare" to describe payments made for the transportation of
people. The freight interest is owned by the person who is operating the vessel. This person may be the
owner of the ship, or he may be the charterer of the vessel. Generally, the ship-owner and the freight
receiver are the same person. Freight may be paid either in advance or on the arrival of the goods at the port
of destination. If the freight is paid in advance, and the goods are lost, the freight receiver does not lose
anything, but the cargo owner will lose it. Hence, cargo owners usually insure it along with the goods by
adding it to the value of the goods. If freight is to be paid at the port of destination, then, according to
marine law, it becomes payable only if the goods reach the port of destination. In case they fail to reach the
destination on account of being lost in the way or any marine perils, the shipping company or the freight
receiver loses the freight. To protect itself against such a loss of freight, the freight receiver or the shipping
company purchases a marine insurance policy. This is called “Freight Insurance”.
 (4) Liability- It is another subject matter of insurance, which arises due to marine risks. This is the liability
of the owner of the ship to a third party because of marine perils. This may include liability hazards such as
collision or running down. For example, if a ship collides with another in its voyage, the owner of the ship
shall be liable to the owner of the other ship (third party). By obtaining an insurance policy, such a risk can
be transferred to the marine insurer. This is known as liability insurance. Insurance can also be taken for the
expense involved in non-compliance with rules and regulations without any intention to deceive.
 KINDS OF MARINE INSURANCE POLICIES
 Marine insurance policies vary to suit different risks and needs. Key types include:
1. Time Policy- A Time Policy insures the subject matter for a definite period (not exceeding one year),
regardless of the number of voyages. The insurer is liable for losses during this period, even if the actual
loss happens after it ends. In Mercantile Marine Insurance Co. v. Titherington, coverage extended due to
a “30 days in port” clause. These policies often include a continuation clause allowing extended coverage
if the ship is still at sea when the policy ends. Common for hull insurance.
2. Voyage Policy- A Voyage Policy covers the subject matter from one specific place to another (e.g.,
Bombay to London). The risk begins when the ship sails (if “from”) or includes time at the port (if “at
and from”). The policy is indivisible, covering the entire voyage and typically used for cargo insurance.
3. Mixed Policy- A Mixed Policy combines elements of both time and voyage policies (e.g., “from Bombay
to Liverpool for six months”). It applies rules of both types and is common for ships on regular routes.
4. Valued Policy- In a Valued Policy, the value of the subject matter is agreed upon in advance and is
conclusive unless fraud or misrepresentation is proven. Despite concerns that it may resemble a wagering
contract, courts (e.g., Thames Mersey Insurance Co v. Gunford) have upheld its validity. Over or under-
valuation affects indemnity, but does not automatically void the policy unless there's fraud.
5. Unvalued or Open Policy- An Unvalued Policy doesn’t state the value of the subject matter; it must be
proven after a loss, within the insured sum. Insurable value is defined in Section 18 of the Act: For ships, it
includes the ship’s value, fittings, wages, and insurance cost. For freight: gross freight at risk. For goods:
prime cost + shipping + insurance. Unvalued policies don’t include anticipated profits and can lead to
disputes over value after a loss.
6. Floating Policy- A Floating Policy provides general coverage without naming ships or full details. Specifics
are later declared by the insured as shipments occur. Coverage decreases with each declaration until fully
used. Declarations must follow shipment order, as per Section 31(3). Delay in declaration, as in Union
Insurance Society v. Wills & Co., can void the claim. Commonly used by exporters shipping frequently.