Department for Maritime and Transport Law| 28 May 2018 Dr. Iva Savić MARINE INSURANCE Department for Maritime and Transport Law| 28 May 2018 Dr. Iva Savić

Role of transport insurance (TI) Marine insurance – first insurance in the history (ancient cultures 500-300 yrs BC) follows growth of cargo shipping and technological development of maritime transport insuring a variety of material interest involved in transport chain marine insurance – special legal regime, specific institutes

marine insurance Insuring the interest – transfering the risk Including: Hull insurance Marine Cargo insurance Marine Liability insurance * off-shore platforms, containers * Club insurance (P&I clubs)

Princples of transport insurance Principle of Uberrimae fidei (Utmost Good Faith) insurance contract must be signed by both parties (insurer and insured) in an absolute good belief person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance Transport insurance: like a professional Principle of Insurable Interest physical existence of the insured object gives him some gain but its non- existence will give him a loss > when the damage of the insured object occurs, the insured person must suffer some financial loss Possible for damage occuring before the contract was signed - MIA 1906 „lost or not lost” - only if there is no (fraud)

PRINCIPLES (part 2) Principle of Indemnity protection against unpredicted financial losses arising due to future uncertainties Certain amount of money paid for material loss on insured object as a result of insured risk insurance policy shall not provide compensation to the policyholder that exceeds their economic loss Scope of compensation is defined by the policy same financial state as the one prior to the loss Cumulation of requests = limit: loss suffered

Marine insurance contract Informal agreement Issuance of insurance policy only if required by insured party Defining - ELEMENTS: Insured object/value (amount), Insured risk, premium, compensation (indemnity) INSURER– issues insurance policy + pays compensation INSURED PARTY – has insurable interest + pays premium > and who signs the contract?

Insurance policy ON TIME ON (SPECIFIC) VOYAGE > For those not regularly engaged in international trade; one- time-only basis > single shipment (voyage) VALUED MARINE POLICY > a policy which specifies the agreed value of the subject matter insured OPEN COVER > most commonly used; covering number of shipments over a period of time; „sleep easy” (pre-determined rates, terms and conditions) Etc.

Insurable risk Future, uncertain event that is outside the scope of the insured party and the insurer Basic risks covered: accidents (sea perills), disaster, fire and explosion, piracy Additional risks: war, strike etc. ≠INSURED EVENT– event that occured as a consequence of a insured risk

Damage covered Total Loss Actual Total Loss – complete loss; damages too big to be reparable Constructive Total Loss (Partial Loss) – repair costs are the same of higher than the real value of object insured; Abandonment – insurer pays compensatino as if total loss occured and gets the vessel in possession Compromised Total Loss - negotiated total loss settlement between the property owner and the insurance company under unusual circumstances

Excluded Losses Contractual exclussion Legal exclussions > caused directly or indirectly with the intent of the insured party > caused directly or indirectly with the intent or recklessly and with knowledge of persons for whose act and omissions the insured party is liable for (excluding crew members) > caused by un-seaworthy vessel if the insured party knew or should have known (with due dilligence) War and political risks, strike risks, nuclear risks

HULL INSURANCE

Hull and machinery insurance Includes: the hull insurance, its machinery, installations and equipment, its supplies and other objects transported by ship or located on board provides physical loss or damage insurance for the hull (shell) of a ship and her propulsion machinery and any equipment used for activities (e.g. cargo handling) perils such as collision, grounding, fire and explosion, earthquakes (and the tidal waves that might follow them) etc.

1995 INTL HULL CLAUSES MARINE WAR AND STRIKE Institute Time Clauses-Hulls Institute Time Clauses-Hulls-Restricted Perils Institute time Clauses-Hulls, Total Loss, General Average and ¾ the Collision Liability Institute time Clauses-Hulls, Total Loss only Institute Voyage Clauses-Hulls Institute Voyage Clauses, Total Loss, General Average and ¾ the Collision Liability WAR AND STRIKE Institute War and Strikes Clauses, Hulls-Time Institute War and Strikes Clauses, Hulls-Voyage

CARGO INSURANCE

Cargo insurance International transport Domestic transport- terms and conditions of national (local) insurers INSTITUTE AMERICAN CARGO CLAUSES A,B,C (USA) INSTITUTE LONDON CARGO CLAUSES (REST OF THE WORLD)

Institute Cargo Clauses The Institute Cargo Clauses (ICC) = Set of terms for cargo insurance policies adopted as standard terms by many international marine insurance organizations Institute = international underwriting association (IUA) (formerly known as The Institute of London Underwriters) https://www.iua.co.uk/

MARINE CARGO INSURANCE - INTERNATIONAL INSTITUTE GENERAL ICC A ICC B ICC C SPECIAL TRADE WAR STRIKES

coverage Port-to-port Warrehouse-to-warehouse clause > The time goods leave the warehouse (at the place named in the policy) – ordinary course of transit – discharge at final port (warehouse)

New Marine Policy Form (MAR) 5 basic packages > A/B/C marine insurance+ war + strike BASIC marine/multimodal: Institute Cargo Clauses (A/B/C) Institute War Clauses Institute Strike Clauses SPECIAL Institute Theft, Pilferage and Nondelivery Clause) Institute Frozen Food Clauses Institute Frozen Meat Clauses FOSFA Trades Institute Timber Trade Federation Clauses Institute Bulk Oil Clauses • Norwegian Marine Insurance Plan, Institute American Cargo Clauses, intl UNCTAD conditions for cargo insurance

Liability insurance

Compulsory vs non-compulsory Charterers, carriers, marine operators, ship repairers, stevedors, terminal operators etc. COMPULSORY, when there is a special public interest for protection of certain society groups, relations or objects There is a great danger of certain objects or activities

Compulsory marine liability insurances Oil pollution (CLC 1992) Transport of HNS (HNS Convention 1996)* Bunker oil pollution (Bunker Convention 2001) Wreck removal (Nairobi convention 2007) Death and personal injury to passengers (Athens Convention with Protocol 2002) – only 1st tier of liability

P&I Clubs https://www.igpandi.org/article/list-principal-clubs

Protection and indemnity insurance Mutual liability insurance Standard (hull&machinery) insurance was not covering liability of shipowners for collission damages and other liabilities 18th Century Great Britain, formation of Clubs to provide Hull insurance at reasonable cost Beginning of 19th Century, Hull insurance became more affordable, Hull Clubs went into decline. (today a few exist but not commonplace at all). As the 19th Century progressed, greater exposure to 3rd Party liability claims, in particular from their crews. Laws were passed which made it even easier for crews and their dependents to claim. Mid 19th Century - group of shipowners joined together in 1855 and formed the “Shipowners Mutual Protection Society”

Insuring named perils(P&I Rules) Including: Personal injury / illness / death (Crew, Passengers, Stevedores, Third parties) • Collision • Wreck removal • Damage to fixed and floating objects • Pollution • Cargo damage/shortage • Fines P&I clubs offer indemnity in limitations set by relevant laws pay-to-be-paid / “first pay” rule wilful misconduct defence

Rules of the Club – insurance conditions No premiums so-called „calls” first call - 80% predicted sums Supplementary (closing) call – at the end of the year, depending on Reinsurance possibility : International Group of P&I Certificate of Entry Rules of the Club – insurance conditions