PRESENTATION TO MARSH MUMBAI

Hull & Machinery Insurance Claims

- An Overview

By
Prof. Tony Fernandez
eMember
Adjuster, Mediator, Arbitrator
– Association of Average& Adjusters
Learning Fac
of

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Presentation Objectives

enumerate the nature and extent of Risk Expo

o a Shipowner and to Seafarers.

discuss the nature and extent of H&M Insuran

ver for Shipowners.

describe the responsibilities of Shipowners an

afarers under a Policy of Marine Hull Insuranc

understand the different types of H&M Claims

he process of Claims Settlements.

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Presentation Plan

1. Overview of Shipowners’ Risk Exposure

2. Proposal for H&M Insurance & Renewals

3. Duties of the Assured during Policy period

4. Types of H&M Claims

5. Claim Documentation & Claim Procedures

6. Summary and Conclusions

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Parties Involved in a Maritime Adventure

Cargo

Contractor’s Freight
Equipment at Risk
Ship

Leased
Bunkers
Equipment
of T/C
Containers

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Exposure to Parties of a Maritime Adven
* RAHU
(Ignorance)
MARITIME Disability of Death of HUMAN
PERILS Personnel Personnel FRAILTY

L Personnel P
Legal i r Owned
Liability a o Property
b “Horror-Scope” p
i e
Contractual li r Others’
Liability t t Property
y Profits y

INEVITIBLE Tangible IntangibleINEXPLICABLE

OCCURRENCES Profits Profits ACCIDENTS
* KETU
Mumbai – Overview
(Arrogance) of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1
 “Maritime Perils”

“‘Maritime Perils’ means the perils

consequent on,
or incidental to, the navigation of
the sea, that is to
say, perils of the seas, fire, war
perils, pirates,
rovers, thieves, capture, seizures,
restrains and
detainments of princes and
people, jettisons,
barratry, and any other perils of
the like kind or
Mumbai –may beofdesignated
Overview by
H&M Insurance © the
Prof. policy.
Tony Fernandez, 03-Jun-1
 “Human Frailty”

Human Frailty means human

weakness and comprises of
“human error” and “human
misdeeds”. The former is not
intentional, while the latter is
intentional and deliberate.

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

icable Accidents” and “Inevitable Occurr

Inexplicable accidents refers to

those types of accidents which
cannot be explained in terms of
how or why they were caused.
Inevitable occurrences refers
to those types of occurrences
that are bound to occur and are
not fortuitous, such as wear
and tear.
Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1
 Definition of “Accident”

cident is an undesired and unexpected sequen

nts leading to a loss. Within a marine context

ay involve a fatality or injury to persons, dama

/ machinery, loss of profits and incurring of

ties or Liabilities under law or contract.

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Concepts of Marine Liabilities
Liability is a debt owed to
another, for damages caused,
either under Common Law,
Admiralty Law, International
Convention, National Statute or
In order
under to obtain compensation
a Contract.
for maritime liabilities, legal
proceedings are instituted either
In Rem or In Personam.
Liability is subject to Immunity
and Limitation.
Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1
 Types of Maritime Liabilities

Liabilities

Under Under Under Under

Common Admiralty Statutes & Various
Law Law Conventions Contracts
- Collision - Salvage - Carriage by Sea - Carriage by Sea

- Contact, Etc. - General Average

- Pollution, Etc. - Agency, Etc.

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Professional Risk Carriers

Strikes Liability War

(P&I) P&I (P&I)

Strikes Property War

(H&M) H&M (H&M)

Pecuniary
Freight Loss Of Cargo
Etc. Hire Etc.

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

ssification of Marine Hull Insurance Polic

Marine Hull
Policies

Restricted “Wider”
Cover Cover

Total Loss Total Loss “All Risks” “Named Perils”

Only & Liability Policies Policies

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Hull & Machinery Insurance Policies

Types of
H&M Policies

“All “Named
Risks” Perils”

Ø Institute Builders’ All Risks Ø Institute Time Clauses

Ø Owner’s Clauses Ø Institute Voyage Clauses

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Edifice of A Hull & Machinery Insurance P

Win-Win Approach
mate Cause, Insured Perils, Excluded Perils, Warranties, Deductibl

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Principle of Indemnity
Principle of Utmost Good Faith

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Classification of Property Losses

Property
Losses

Partial Total

Ø Damages fully repaired Ø Actual Total Loss (ATL)

Ø Damages partially repaired Ø Constructive Total Loss (CTL)
Ø Damages un-repaired Ø Compromised / Arranged CTL

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Classification of Common Law Liabilities

Common Law
Liabilities

Collision Contact
Liability Liability, Etc.

Ø ¾ Cover Under H&M Ø No Cover under H&M

Ø ¼ Cover Under P&I Ø Full Cover under P&I
Ø Sister-ship Collision

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Classification of Admiralty Law Liabilities

Admiralty Law
Liabilities

Maritime General
Salvage Average

Ø Pure Maritime Salvage Ø Common Safety

Ø Sister-ship Salvage Ø Common Benefit
Ø Contractual Salvage (LoF) Ø Contractual (Y-A Rules)

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Classification of Statutory Law Liabilities

Statutory Law
Liabilities

National International
Statutes Conventions
Ø No cover under H&M Ø No cover under H&M
Ø Covered under P&I Ø Covered under P&I

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Institute Time Clauses – Hulls

Insured
“Named Perils”

Pure Marine “Inchmare”

Perils Perils

Ø No Due Diligence Proviso Ø Due Diligence Proviso

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

e Marine Perils” Covered In ITC Hulls 1/1
This insurance covers loss of or damage to the sub
matter insured caused by:-
Perils of seas, rivers, lakes or other navigable waters,
ire, explosion,
Violent theft by persons from outside the Vessel,
ettison,
Piracy,
Breakdown of or accident to nuclear installations or re
Contact with aircraft or similar objects or objects fallin
therefrom, land conveyance, dock or harbour equipme
nstallation,
arthquake, volcanic eruption or lightning
Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1
chmare Perils” Covered In ITC Hulls 1/10
his insurance covers loss of or damage to the
subject-matter insured caused by:
Accidents in loading, discharging or shifting cargo or f
Bursting or boilers, breakage of shafts, or any latent d
n the machinery or hull
Negligence of Master, Officers, Crew or Pilots
Negligence of repairers or charterers provided such re
r charterers are not an Assured hereunder
Barratry of Master, Officers or Crew,
rovided such loss or damage has not resulted from w
ue diligence by the Assured, Owners or Managers

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

iability Risks Covered In ITC Hulls 1/10/8

Liability Risks

Legal H&M – ITC Hulls 1/10/83 Contractual

Collision (3/4)
Seafarers,
Common Law Employment
Contact, Etc. Shore Staff, Etc.

Maritime Salvage Salvage (LoF),

Admiralty LawGeneral Average. GA (YAR).
Contingencies

Statutory LawPollution “SCOPIC -2000”Other Contracts

Wreck Removal “Wreck Hire” Etc.
Customs Agency
Immigration Managers
Sea Carriage Sea Carriage

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Types of H&M Insurance Claims

Physical Loss / Damage to Hull / Machinery

Caused by Insured Perils
. Physical Loss / Damage to Hull / Machinery
Caused by Governmental Authorities

Liability Claims arising under Collision Liability

lvage Liability and General Average Liability
aims under Loss Minimization at Sea –
ue & Labour and Single Interest General Avera

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Impact of the Marine Insurance Act 1906

Background of the Marine Insurance Act 1906

Nature of MIA 1906 – Prescriptive, not Regulat

Relationship between Act and Policy

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 H&M Claim Processing

Documentation INSURANCE
SHIPOWNER
Settlement BROKER

OWNER’S CLASSIFICATION INSURER’S

SURVEYOR SURVEYOR SURVEYOR

SURVEY CLAIM SURVEY

REPORT DOCUMENTS REPORT

AVERAGE Statement
H&M INSURER
ADJUSTER of Adjustment

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Responsibilities of Shipowner / Seafarers

1. Observe the Utmost Good Faith

Pay Premium and comply with Policy Conditio

3. Strictly comply with all Warranties

4. Act prudently as if not insured

5. Act with Due Diligence at all times

6. Be Prompt in Claim Intimation

Continued…

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

Responsibilities of Shipowner / Seafarers
(Continued)
07. Protect Rights of Recovery
08. Never admit Liability to other Parties

09. Mitigate Loss promptly

10. Document all facts accurately

11. Intimate Accidents and Near Misses

12. Use Professional Intermediaries

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1
ocal Challenges For Professional Brokers

01. “Competing” with the un-professionals

02. Light the Lamp to dispel the darkness

03. Counter “Arrogance” with Professionalis

04. Base Relationships on “Win-Win”

05. Build and maintain Strategic Alliances

06. Learn Lessons from the mistakes of othe

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1

 Summary & Conclusions

sk Exposure in the Shipping Industry is very hi

and needs to be effectively managed.

M Insurance does not respond to all Risks and

e Deductible has to be borne entirely by Shipow

ies and Responsibilities of Shipowners and Se

nder a H&M Policy of Insurance are onerous.

oactive after a loss by documenting facts

rately and submitting Claim Documents in tim

Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-1