Marine Claims

MARINE CLAIMS
PRESENTED BY T.S.SHRINIVAASAN
OF MAR-TECH INSURANCE
SURVEYORS & LOSS ASSESSORS
TYPES OF LOSSES
GENERAL
ACTUAL
CONSTRUCTIVE
PARTCULAR
SUE
&AVERAGE
LABOUR
TOTAL
CHARGES
LOSS
CHARGES
LOSS
TOTAL LOSS
TOTAL LOSS
ACTUAL TOTAL LOSS:
According to Sec. 57(1) of the Act, there is
an actual total loss where the subjectmatter insured is destroyed or so damaged
as to cease to be a thing of the kind
insured or where the assured is
irretrievably deprived thereof.
There are three elements in this definition:
a) When the subject matter is destroyed,
there is clear case of actual total loss.
PRESENTED
BY T.S.SHRINIVAASAN
Destroyed should
not
be literally
interpreted. For
eg. Due to fire in a ship, it
ACTUAL TOTAL LOSS

(contd.)
Second element is subject matter ceased to be thing of the kind insured. Roux v
Salvador (1836) describes this point.
Hides were insured for their journey. Unfortunately they were in a process of
putrefaction which would have been complete by the time of arrival at the port of
destination, Bordeaux, such that on arrival they could not properly have been
described as hides. Held. Lord Abinger CB: "In the case before us the jury have found
that the hides were so far damaged by a peril of the sea, that they never could have
arrived in the form of hides. By the process of fermentation and putrefaction, which
had commenced, a total destruction of them before their arrival at the port of
destination, became as inevitable as if they had been cast into the sea or consumed
by fire. Their destruction not being consummated at the time they were taken out of
the vessel, they became in that state a salvage for the benefit of the party who was to
sustain the loss, and were accordingly sold; and the facts of the loss and the sale were
made known at the same time to the assured. Neither he nor the underwriters could
at that time exercise any control over them, or by any interference alter the
consequences. It appears to us, therefore, that this was not the case of what has been
called a constructive loss, but of an absolute total loss of the goods: they could never
arrive; and, at the same moment when the intelligence of the loss arrived, all
speculation was at an end."
b)
ACTUAL TOTAL LOSS

(contd.)
Another example to illustrate this point is a
consignment of sugar, which due to ingress
of seawater, sugar turned into juice.
Similarly cement due to contact with sea
water becomes solid block or concrete and
loose its character as cement.
Consignment of Oranges or apples due to
malfunction of reefer machinery totally
putrefied and loses the shape of a normal
orange.
ACTUAL TOTAL LOSS

(contd.)
Third element is irretrievably deprived:
By this point, subject matter is completely
missing. Say in the RMS Titanic was a
British passenger liner that sank in the North
Atlantic Ocean on 15April 1912 after colliding
with an iceberg during her maiden voyage
from Southampton, UK to New York City, US.
The sinking of Titanic caused the deaths of
more than 1,500 people in one of the
deadliest peacetime maritime disasters in
modern history.
RMS TITANIC
CONSTRUCTIVE TOTAL LOSS

Section 60(1) of M.I.Act provides that
there is constructive total loss when
the subject matter is reasonably
abandoned because, either:
- Actual total loss appears unavoidable
or
- To prevent actual total loss requires
expenditure exceeding the saved
value
CONSTRUCTIVE TOTAL LOSS

(contd.)
Sec. 60(2) specifies provision in relation to ship
and goods.
In particular, there is CTL:
- Where the assured is deprived of the possession
of his ship or goods by a peril insured against
and
- It is unlikely that he can recover the ship or
goods as the case may be ; or
- The cost of recovering the ship or goods, as the
case may be, would exceed their value when
recovered.
EXAMPLES OF C.T.L
In George Cohen Son & Co. v
Standard Marine (1925), a ship was
insured for her funeral voyage ,
whilst being towed from a UK Port to
a German Port, where she was to be
scrapped. The vessel went ashore on
the Dutch Coast. The Dutch
Authorities did not allow her to be
moved lest the operation should
damage the sea defenses in the
EXAMPLE OF C.T.L
In Vacuum Oil Co. v Union Insurance Society of Canton,
the vessel was carrying 10000 Tins of petroleum
stranded and became a total loss. About 8000 tins
which floated ashore were recovered and large number
of them were leaking. They were partially repaired. It
was a constructive total loss on the ground that it was
unlikely that a ship owner would be found to carry
damaged tins and the probable cost of transhipment.
The judge said :I am quite satisfied that it would have
been perfectly impossible to get anybody, however
optimistic the owner of a sailing vessel trading in the
Mediterranean in these ports might be, to carry a cargo
leaky petroleum tins.
DISTINCTION BETWEEN ATL

&
CTL
Actual Total Loss
Constructive Total Loss
a) Where, by a peril insured
against, the assured is
irretrievably deprived of the
subject matter insured.
Where, by a peril insured

against, the assured is
deprived of the possession of
the subject matter and it is
unlikely that he can recover it.
b) Where the subject matter is Where the assured is deprived

destroyed by a peril insured
of the possession of the
against.
subject matter by a peril
insured against and the cost
of recovering it would exceed
its value when recovered.
c) Where by a peril insured
Where, the subject matter is
against, the subject matter
so damaged by a peril insured
undergoes a physical change
against that the cost of
BY T.S.SHRINIVAASAN
of character or speciePRESENTED
and
repairing the damage
ASSESSORS with incidental
ceases to be a thingSURVEYORS
of the & LOSS
(together
PARTIAL LOSS & PARTICULAR

AVERAGE
Sec. 56 of the act provides that any loss other than
total loss is a partial loss.
Sec. 64(1) defines a particular average loss as the
partial loss of the subject matter insured, caused by a
peril insured against, and which is not a General
Average Loss
Particular Average, therefore means a fortuitous partial
loss caused by a peril insured against.
Examples of Particular Average are: Damage to the
ship by stranding, running aground, collision etc.
damage to the cargo by fire, sea water etc.
Note: Average in marine insurance means partial loss.
PARTICULAR CHARGES
Sec. 64(2) of MIA, defines particular
charges as expenses incurred by or
on behalf of the assured for the
safety or preservation of the subject
matter insured. They are expenses
other than General Average and
Salvage Charges. In order to avert a
greater loss which would otherwise
fall on the policy, particular charges
may be incurred, and they are
SUE & LABOUR CHARGES

Another type of expenditure for which Insurers may be
liable arises under the Sue and Labour Clause in Cargo
and Hull Policies.
In cargo Clauses the clause is named as Duty of
Assured Clause.
In Hull Policy it is Sue & Labour Clause.
By this clause, attention is drawn to the common law
duty of the assured and his agents to act at all times, as
though uninsured and to take such measures as may be
reasonable for the purpose of averting or minimizing
loss or damage which is covered by the Insurance. The
expenditure is payable in addition to the loss of or
damage to the subject matter of insurance.
SUE & LABOUR CHARGES

(contd.)
This clause is deemed to be a separate
and supplemental agreement to the policy,
and it binds the insurers to pay any
expenses incurred by the assured or his
agents in preventing or minimizing loss or
damage to the subject matter insured
caused by an Insured peril.
Such expenses, when properly and
reasonably incurred, are payable
irrespective of percentage and even in
PRESENTEDloss.
BY T.S.SHRINIVAASAN
addition to a total
In
fact
sue
and
SURVEYORS
& LOSS ASSESSORS
labour charges provide
the only instance
Examples of S & L Chrages

Hides damaged by sea water: Re-conditioning
expenses at an intermediate port to prevent
aggravation of damage.
Due to a maritime casualty a ship puts into a
port of refuge for repairs which would take
some extra weeks. The cost of extra fodder fed
to the live cattle insured against All Risks
during the period of repairs is sue and labour
charges.
The additional cost of forwarding cargo from a
port of refuge to earn the freight payable on
delivery at destination
is recoverable, if in the
absence of suchSURVEYORS
cost
, LOSS
a claim
&
ASSESSORScould result for a
SUE & LABOUR CHARGES &

PARTICULAR CHARGES
Sue & Labour Charges are incurred short
of destination like re-conditioning costs.
Second difference is that S & L charges
follows upon loss or damage , where as
particular charges may be incurred when
loss is threatened or imminent but is
avoided by expenses for that purpose.
However, in practice both expenses are
treated alike.
EXTRA CHARGE
These are the expenses of proving a claim e.g.
Survey Fees.
Sale charges and auction fees incurred in
disposing of damaged cargo.
Normally the Survey fee is payable by Insurer, if
claim is admissible by Insurer. It is customary
for Surveyors to collect survey fee from Insured
and thence to claim from Insurer, If claim is
admissible by Insurer.
But now a days whether a claim is tenable or
otherwise, Survey Fee is admissible by Insurer.
SALVAGE CHARGES
Sec. 65 of MI Act defines salvage charges as
those recoverable under maritime law by a
slaver independently of contract. Maritime
Salvage is the remuneration or reward
payable according to maritime law to salvers
who render services to rescue or save
property at sea , such as a ship, her cargo and
freight at risk. Normally reward is on no pay
no cure basis. Salvers have a maritime lien
on the party salved and they can enforce their
claims in court.
GENERAL AVERAGE LOSS

G.A. Loss is defined in Sec 66(1) of the Act as
a loss caused by or directly consequential on
a general average act. It includes a general
average expenditure as well as general
average sacrifice.
Sec 66(2) provides There is G.A Act where
any extraordinary sacrifice or expenditure is
voluntarily and reasonably made or incurred
in time of peril for the purpose of preserving
the property imperiled in the common
adventure
EXAMPLES OF G.A.
Ship: 1) Anchors and/or cables may
be lost or damaged in efforts to
refloat a vessel which has stranded.
2) Bulkhead of a vessel may have to
be broken down to reach the seat of
fire in the lower holds.
Cargo: 1)Jettison of cargo to lighten
the ship. 2) Water used to extinguish
fire on cargo may cause damage to
other cargo not on fire.
EXAMPLES OF G.A
In this context, reference may be made to some of the York-Antwerp Rules
(numbered) which deal with losses allowable in general average.
Rule I provides that no jettison of cargo shall be made good as General
Average, unless such cargo is carried in accordance with the recognized
custom of the trade For.eg Timber and containers stowed on deck etc.
Rule II provides that damage done to a ship and cargo, or either of them,
by or in consequence of a sacrifice made for the common safety and by
water which goes down a ships hatches opened or other opening made
for the purpose of making a jettison for the common safety , shall be
made good as general average.
Rule IX provides that ships material and stores, or any of them
necessarily burnt for the common safety at a time of peril, shall be
admitted as G.A, when and only when ample supply of fuel has been
provided.
Examples for Freight: The expense of hiring craft to lighten a vessel when
it is stranded. The expenses of hiring tugs to tow a vessel to a port of
refuge.
COMPARISON OF G.A & PARTICULAR

AVERAGE
GENERAL AVERAGE
PARTICULAR AVERAGE
1) It is incurred for the benefit

of all interested parties
1) It is associated with a
particular partys damage or
loss.
2) The losses are voluntarily

incurred.
2) The losses are accidental or

fortuitous.
3)General Average is shared

by all who are benefitted by
the Average Act.
3) Particular Average is paid

by Insurer.
4)It includes expenditure &

sacrifice along with loss
4) Loss is resulting from an

accident/perils of the sea.
5) Losses are of extra ordinary 5) Pure accidental in nature

character or of emergency
and not extraordinary or
nature
emergency involved.
6) The cause cannot be
6)ASSESSORS
Perils/losses can be insured
SURVEYORS & LOSS
MARINE CLAIMSDOCMENTS
Insurance Policy
Invoice Copy
Damage certificate from carrier
LR/AWB/RR copy with endorsement
Monetary claim on carrier
Carriers reply or AD slip
Packing List
Claim Bill
MARINE CLAIMS- PROBLEMS

1) A consignment of 1000 Cartons of
jam in jars is railed from Mumbai to
Delhi under Inland Transit (Rail or
Road) Clause A for a sum insured
of Rs. 240000 so valued. Each
carton contained 2 dozens jars and
particulars on the Invoice are as
follows:
MARINE CLAIMS PROBLEMS

CA
RT
ON
S
250
250
250
250
JAM
DOZ
ENS
RATE
CIF
PER
VALUE
DOZ- RS. RS.
MANGO
CHERRY
APRICOT
PINEAPPLE
500
500
500
500
100
120
100
110
Total
50000
60000
50000
55000
215000
PROBLEM - CONTD
On arrival at Delhi, a number of Jars were found
broken and missing. Particulars of loss, as
evidenced by Survey Report are as under:Mango
Cherry Apricot P/Apple
Ctns. Jars Ctns. Jars Ctns Jars Ctns. Jars
Broken 12/11
8/3
3/9
6/10
Missing
5/19
3/6
7/3
3/14
Total
18/6
11/9
10/12
9/24
Survey Fee including sorting charges are Rs.3000/Please state if claim admissible by Insurance
Company and if so what is the claim Amount ?
PROBLEM CONTD.
Claim is admissible by Insurance, because Clause attached is A which
covers shortage and damage.
Mango
Cherry Apricot P/Apple
Ctns. Jars Ctns. Jars Ctns Jars Ctns. Jars
Total
18/6
11/9
10/12
9/24
(broken + Missing)
In Doz:
36.5
22.75
21
20
Rate/Doz 100
120
100
110
Loss :
3650
2730
2100
2200
Total
Rs.10680
When Invoice value of 215000/- is insured for Rs.240000/What would be Insured value of Rs.10680/- = Rs.240000 *10680/215000
i.E
= Rs.11,922/Add: Survey Fee + Reconditioning charges = Rs. 3,000/Total Claim payable
= Rs. 14,922/PRESENTED BY T.S.SHRINIVAASAN
MARINE CLAIM- PROBLEMS

Problem 2.
400 Cases shoes (each containing 50 pairs in
boxes) are insured for USD 40000/- so
valued, were shipped to London from
Mumbai. On the voyage heavy weather was
experienced and damage to cargo occurred,
consequent to leakage in the hold.
Subsequently a fire broke out, seriously
damaging the ship and cargo. On arrival at
London following losses were ascertained.
Problem 2 Contd.
A) 120 cases damaged by fire depreciation 30%
B) 40 cases damaged by sea water depreciation
40%
C) In 12 Cases, pilferage was noticed and 50 pairs
were missing.
D) 10 Cases were lost overboard during discharge
E) 218 Cases arrived Sound.
Survey Fee payable USD 100/ Work out the claim payable, if the Insurance cover
was 1) ICC-A, 2) ICC-B and ICC-C.
Problem 2 Solution.
400 Cases insured for USD 40,000/Therefore insured value of 1 case = USD 100/Particulars
Insured Value Depreciation Claim
120 c/s fire
USD12000/30%
USD3600/40 c/s w/d
USD 4000/50%
USD2000/1 c/s missing USD
100/-USD 100/10 c/s LOB
USD 1000/-USD1000/TOTAL
USD6700/-
Problem 2 Solution Contd.

Under ICC-A
Above admissible : USD 6700/Add: Survey Fee : USD 100/Total Claim
: USD 6800/ Under ICC-B
Other than pilferage, remaining admissible
i.e
: USD6600/Add: Survey Fee
: USD 100/Total Claim
: USD6700/ Under ICC-C. Only fire damage alone is admissible.
i.e
: USD3600/Add: Survey Fee
: USD 100/Total Claim
: USD3700/PRESENTED BY T.S.SHRINIVAASAN
Problem 3 Collision Claim

Two ships A and B in collision.
Each held equally to blame.
Damage to ship A = USD
8000/ Damage to ship B =
USD20000/- Assuming both
ships are fully covered by ITC
Hull, work out claim of both
Collision Claim contd.

Claim on As Policy:
P.A
R.D.C
P&I
Damage sustained 8000/Collision Liability
7500/- 2500/Credit Recovery from B 4000/--------------------------------Total
4000/- 7500/- 2500/Total Claim on As Policy = USD 11500/- and he
will get USD 2500/- from his P & I club. As Hull
claim is subject to deductible shown in ITC Hull.
Collision Claim contd.

Claim on Bs Policy:
P.A
R.D.C
P&I
Damage sustained 20000/Collision Liability
3000/- 1000/Credit Recovery from A 10000/--------------------------------Total
10000/- 3000/- 1000/Total Claim on Bs Policy = USD 13000/- and he will
get USD 1000/- from his P & I club. Bs Hull claim
is subject to deductible shown in ITC Hull.
Problem 4 G.A Claim

A vessel with cargo on board, on voyage from
Mumbai to European ports, strands and
sustains damage. After jettisoning part of the
cargo, she is subsequently refloated working
her engines and with the assistance of tugs.
Assume following are the amounts involved.
Particular Average damage to ship :US20,000/ General Average damage to ship :US20,000/ Amount paid for assistance in
:US30,000/refloating
Problem 4 G.A Claim contd.

Amount to be made good for
: US25000/sacrifice of cargo
Amount to be made good for : US 5000/sacrifice of freight
Sound Value of ship
: US700000/ Nett Arrived value of cargo
: US300000/ Gross Freight received
: US 50000/ Cost of earning freight subsequent: US10000/to refloating
What is G.A Loss and what would be the contributory
value for Ship, Cargo and Freight.
G.A damage to ship

= US20,000/Amount for refloating
= US30,000/Amount for cargo sacrifice =US25,000/Amount for freight sacrifice=US 5,000/Total General Average Loss = US80,000/APPORTIONMENT OF G.A:
SHIP: Sound Value
= US 7,00,000/Less: P.A & G.A Damage
= US 40,000/Add: Made Good in G.A
= US 20,000/----------------US 6,80,000/- (1)

CARGO: Nett Arrived Value : US3,00,000/Add: Amount Made good : US 25,000/-
FREIGHT: Gross freight

Less: Cost of earning after
refloating
Add: Amount made good
Total of Contributory Values
Total G.A Loss
US3,25,000/- (2)
: US 50,000/: US 10,000/: US 5,000/US 45,000/-(3)
: US10,50,000/: US
80,000/-

G.A will be apportioned as under:
Ship (US6,80,000) will pay
:
US80000/105000*6,80,000 : US 51810/ Cargo (US3,25,000) will pay :
US80000/105000*3,25,000 : US 24762/ Freight(US45,000) will pay
:
US80000/105000*45,000
: US 3428/TOTAL
: US
80000/PRESENTED BY T.S.SHRINIVAASAN
What is P & I Club ?

P&I Clubs [Protection & Indemnity
Insurers]) P&I Clubs are independent, nonprofit making mutual insurance
associations, providing cover for its ShipOwner and Charterer members against
third party liabilities relating to the use
and operation of commercial vessels.
Even Insurers also offer cover for ship
owners. What is so special about P & I
Clubs ?
P & I Club (v) Marine Insurer

Both P&I clubs and conventional marine
insurers are governed by the provisions of the
Marine Insurance Act 1906
Marine insurers also provide cover for known
quantifiable risks, mainly Hull & Machinery
insurance for ship Owners, and Cargo Insurance
for cargo owners.
But P&I Clubs provide insurance cover for
broader indeterminate risks, such as third party
liabilities which Marine Insurers are unwilling to
cover.
What risks do P & I Clubs

cover ?
Third Party Risks like the following:
Carriers liability to a cargo-owner for damage to cargo.
Ships liability after a collision.
Ships liability after an impact/contact.
Ships liability for environmental pollution.
Ships liability for war risks.
Personal injury to or illness or loss of life of crew
members or passengers
Personal injury to loss or loss of life of stevedores.
Loss of Personal Effects of Crew
List endless
P & I insurance (v) cargo

Insurer
Cargo Owners or Shippers also covers
consignment for insurance.
Carrier also has P&I cover.
When a claim arises, the cargo-owner
should first make a cargo claim against
the carrier; but the latter may avoid
liability because either (i) he did not cause
the loss, or (ii) the Hague-Visby Rules
grant exemption from liability.
HAGUE-VISBY RULES- BRIEF

OUTLINE
It is a set of International rules for the international
carriage of goods by sea.
It was first drafted in Brussels in 1924.
It was amended in 1968 and 1979.
By virtue of these rules, ship owners are exempted from
following claims: Loss by fire, perils of the sea, Act of God,
& Act of war.
They also exempt a controversial provision viz:"neglect or
default of the master in the navigation or in the
management of the ship
This provision is considered unfair to the shipper; and both
the later Hamburg Rules and Rotterdam Rules refuse
exemption for negligent navigation and management.
P & I Clubs Claims

Going back, when the carrier
exempts claims as above, naturally
Claimant will resort to their Insurer
for claims.
Insurer may admit the claim after
obtaining subrogation rights from
Insured.
By subrogation rights, Insurer will go
for recovery against Carrier.
P & I Club Claims Collision

While H & M Insurer admits 3/4th
liability, P & I club bears the balance
1/4th liability.
Collisions may be classified as
follows:
Where one vessel is solely to blame
Where both vessels to blame
Where negligence is not proved
against either vessel (force majeure
or inevitable accident)

Marine Claims

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MARINE CLAIMS

ACTUAL TOTAL LOSS

ACTUAL TOTAL LOSS

ACTUAL TOTAL LOSS

CONSTRUCTIVE TOTAL LOSS

CONSTRUCTIVE TOTAL LOSS

DISTINCTION BETWEEN ATL

Where, by a peril insured

b) Where the subject matter is Where the assured is deprived

PARTIAL LOSS & PARTICULAR

SUE & LABOUR CHARGES

SUE & LABOUR CHARGES

Examples of S & L Chrages

SUE & LABOUR CHARGES &

GENERAL AVERAGE LOSS

COMPARISON OF G.A & PARTICULAR

1) It is incurred for the benefit

2) The losses are voluntarily

2) The losses are accidental or

3)General Average is shared

3) Particular Average is paid

4)It includes expenditure &

4) Loss is resulting from an

5) Losses are of extra ordinary 5) Pure accidental in nature

MARINE CLAIMS- PROBLEMS

MARINE CLAIMS PROBLEMS

MARINE CLAIM- PROBLEMS

Problem 2 Solution Contd.

Problem 3 Collision Claim

Collision Claim contd.

Collision Claim contd.

Problem 4 G.A Claim

Problem 4 G.A Claim contd.

Problem 4 G.A Claim contd.

G.A damage to ship

Problem 4 G.A Claim contd.

FREIGHT: Gross freight

Problem 4 G.A Claim contd.

What is P & I Club ?

P & I Club (v) Marine Insurer

What risks do P & I Clubs

P & I insurance (v) cargo

HAGUE-VISBY RULES- BRIEF

P & I Clubs Claims

P & I Club Claims Collision

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