MARINE HULL INSURANCE CLAIMS

ADMINISTRATION

MARINE HULL CLAIMS

ADMINISTRATION

MARINE INSURANCE CLAIMS

Section 56 of the Marine Insurance Act 1906,
defined a loss on marine insurance as either
total or partial.
(a)

TOTAL LOSS

This can either be classified as:

Actual Total Loss
Constructive Total Loss

ACTUAL TOTAL LOSS

There is an actual total loss of cargo where:
The subject matter insured is destroyed for
example, where the cargo is totally destroyed by
fire or explosion.
The subject matter insured ceases to be a thing of
the kind insured e.g. solidification of cement as a
result of immersion of water.
The insured is irretrievably deprived of the
possession of his property as in the case of a
sunken vessel.

CONSTRUCTIVE TOTAL LOSS

There is a constructive total loss of ship where:
She runs ashore (aground), remaining in specie,
but the cost of refloating her would exceed her
value when refloated.
She is captured or seized. It may be released, but
most likely will be condemned by a prized court.
The ship is so damaged and the cost of repairing
the damage would exceed the value of the ship
when repaired.

 It is essential that notice of abandonment be given in

case of constructive total loss, except where it has
been waived by the underwriter or where notice would
confer no benefit to the insurer. In practice, it is wise
for the Assured to always give notice of abandonment,
and by abandonment proprietary rights and liabilities
are transferred. The interest in the insured property is
transferred from the Assured to the Underwriter, while
notice of abandonment once tendered and accepted is
irrevocable. If the Underwriter however realizes more
on sales of cargo or ship abandoned to him than he has
paid on claims, the Assured
is not entitled to
participate in any of the proceeds of the sale.

 However, in practice, the insurers do not

always accept abandonment due to the
additional liabilities that might be conferred on
them through the acceptance of such notice of
abandonment.
It behooves on the Assured to take proceedings
to enforce his claim by the issue of a writ. The
state of the facts existing at the time when a
writ is issued will then determine whether or
not a constructive total loss has occurred.

PARTIAL LOSS

Partial loss is classified as shown

below:

Particular Average
General Average
Sue & Labour (Particular Charges)
Salvage Charges

PARTICULAR AVERAGE

The Marine Insurance Act, 1906 defined

particular average as a partial loss of the
subject matter insured caused by an
insured
peril which is not a general average loss.
An example of particular average loss is partial
damage to cargo or ship by fire, explosion or
lightening.

GENERAL AVERAGE
General Average Loss
A general average loss is a loss
caused by or directly consequential
on a general average act. It includes
a general average expenditure as
well as a general sacrifice. (Sect.
66(1) M.I.A, 1906)

General Average Act

There is a general average act where
any
extraordinary
sacrifice
or
expenditure
is
voluntarily
and
reasonably made in time of peril for
the purpose of preserving the property
imperiled in the common adventure.

General Average Contribution

Where there is a general average

loss, the party on whom it falls is
entitled to a ratable contribution
from the other parties interested,
and such contribution is called a
general average contribution.

General Average Expenditure

The most common type of general average
expenditure consists of port of refuge
expenses and these expense generally arise
in consequence of an accident, sacrifice or
other extraordinary circumstance which
make it necessary for the ship to enter a
port or place of refuge or to return to her
place or port of loading.

EXPENSES
AVERAGE

INCLUDED

IN

GENERAL

The following expenses therefore are usually

allowable in general average on the principle
that the expenditure was in consequence of a
general average act:
Cost of entering the port, i.e inward port
charges, pilotage, port due, etc.
Cost of discharging cargo, in order to effect
repairs.

 Warehouse rent while repairs were

being
effected.
Cost of reloading cargo.
Outward port charges etc.

 It is important to note that for

general
average
to
be
recoverable from the insurers,
the general average must have
been incurred for the purpose of
avoiding, or in connection with
the avoidance of, a peril insured
against.

Conditions For General Average

The general average act must be voluntary but not
fortuitous. (All accidental loss or damage is excluded.)
The act must be extra ordinary and reasonably
incurred. That is, the general average sacrifice must
be prudent; expenditure fair and reasonable.
The object of the loss must be for the preservation of
the whole adventure. Hence, losses incurred for the
benefit of individual interest are not general average.

 The adventure must be saved. That is, if cargo is

sacrificed by jettison to prevent a total loss of the
vessel which is eventually destroyed by fire with
all the remaining cargo on board, there is no
general average.
The loss must be directly consequential on
general average act.
The general average must have been incurred in
connection with the avoidance of a peril insured
against.

PARTICULAR CHARGES

Particular
charges
are
expenses
incurred by the insured or on his
behalf for the safety or preservation of
the subject matter insured.
Provided that the expenses are
reasonably and properly incurred they
are recoverable under marine cargo
insurance.

 The duty of assured clause of the Institute Cargo

Clauses provides thus:
It is the duty of the Assured and their Servants
and Agents in respect of loss recoverable
hereunder to take such measures as may be
reasonable for the purpose of averting or
minimizing such loss and the Underwriters will, in
addition to any loss recoverable hereunder,
reimburse the Assured for any charge properly
and reasonably incurred in pursuance of these
duties.

 This clause is also referred to as sue

and labour or Duty of Assured
Clause.

SALVAGE CHARGES

These are charges recoverable

under maritime law by a salvor
independently of contract. For
this to be recoverable, the
ventures must be successful.

MARINE HULL CLAIMS

ADMINISTRATION
When a claim is notified, the claim officer
registers the claim and gives it a claim reference
number. When an accident has occurred, it is
essential for notice of the accident to be given
promptly to the insurers through the insurance
brokers.
Under a marine hull claim, the Master should
notify Lloyds Agent (or other local Agent of the
insurers when the ship is at any place where
communication with the ship owners office is
difficult.

 The object of such notice is to enable the

insurers or their agents to appoint a Surveyor
to survey the damage sustained by ship and
to attend to repairs where necessary. Most
policies of insurance contain an express
provision regarding notice, and may also
provide for outright repudiation or a reduction
in the claim under the policy in the event of
non compliance. (Refer to Notice of Claim
and Tenders of the Institute Time
Clauses-Hulls.)

 The clause underlined above also allows

underwriters to dictate the port or repair
yard to which the vessel will proceed for
repairs.
The ship owner will also instruct surveyors
to carry out a survey and equally notify the
ships classification surveyors if the
casualty threatens or affects the ships
seaworthiness.

Documentation of Claim
In commercial practice there are various
documents which have been introduced for
particular purposes, which are also useful
in verifying claim under marine policies.
When considering a claim, it is always
necessary to determine whom and what
gave rise to the loss and on whom
responsibility falls.

 The cover granted by underwriter is designed to

protect the insured, who in turn is required
under the provisions of the policy, in all cases to
take reasonable measured to ensure that all
rights against the carriers, bailees or other third
parties are properly preserved and exercised.
Therefore, it is very important that in the event
of loss or damage, the insured is required to
protest against the negligent party and lodge
claim for the full amount of the loss.

The insured owe the following duties to the

insurer in the event of a claim:
To Give Notice of The Loss

In practice, the policy almost invariably

contains a condition requiring the Assured
to give notice of loss and specifying the
manner in which it is to be given.

To Furnish Particulars of Loss

It is the practice of marine insurers to
insert in the policy an express condition,
that the Assured must deliver to the
Insurers within a specified time, full
particulars of the loss or damage in respect
of which the claim is made, unless this
condition is complied with, the claim under
the policy may be avoided.

 To Furnish Proof of Loss

Insurers are empowered by stipulation in the policy to
call upon the Assured to prove that the loss is covered by
the policy and they also verify the particulars given by
such documentary evidence.

It is the duty of the Assured to observe the utmost good

faith in his dealing with the Insurer throughout, therefore
any claim he puts forward must be honestly made and if
any part or portion is fraudulent, he will forfeit all
benefits under the policy whether there is a condition to
that effect or not.

MARINE HULL CLAIM DOCUMENTATION

Constructive Total Loss Claim (CTL).

As a preliminary to a claim for CTL
there must be notice of abandonment
given
by
the
insured
to
the
underwriters except where no benefit
could arise to the underwriters from
so doing, or in the case of
reinsurance. Notice of abandonment
may be waived by underwriters.

Bill of Sale
Where underwriters accept abandonment and pay, or
agree to pay a constructive total loss, the transfer of
the ownership of the vessel to them their nominees
(e.g. the Salvage Association) will need to be certified.
In practice, this is avoided as far as possible by
arranging that the owner shall seek offers to the
vessel through those nominees. If transfer of
ownership is required, however, there is no other legal
method. A wreck does not require such a transfer of
ownership.

Log Books
Extracts from the deck log book.
Extracts from the engine room log book.
These log books are invaluable as they contain
details of all material events relating to the ship,
entered in the log at the time of their
occurrence. For instance, in the engine room
log, all the movements of the engines will be
recorded. If any of the bearing run hot, or any
minor irregularity occurs in connection with
their running, it will be recorded in the log.

Captains Protest or Declaration

This is of value because it sets

down relevant facts regarding
any incident as at the time of
loss.

 Chief Officers/Chief Engineers Casualty or

Damage Report
Survey Reports from the followings are required:

Underwriters surveyor
Classification societys surveyor
Shipowners surveyor
Divers examination report if any

Account for fees and charges of surveyors

listed in item 6 above.

 Specification and tenders

Accounts for all repairs effected
at the shipyard whether
connected with the policy or not
e.g. bottom scrapping/painting.
Marine hull policy

 Vouchers for various expenses incurred e.g.

towage bill and pilotage account.
Portage account.
This gives particulars of the wages and provisions of the
crew only if they are in connection with crews services in
shipping for repairs.
Evidence that class is maintained.

Details of other insurance on the subject matter.

Thanks for listening.