Marine Insurance

History, Development, Principles and Law

 History
• Marine Insurance started by the end of 12th
century in North Italy. When merchants came
to England they brought with the practice of
Insurance.
• Since then it has passed through various
developments and the marine insurance in
present form was the creation of Lloyd’s
Association in 1774 in London.
• All aspects of shipping business were discussed
• Provided unique facilities for them by supplying
a daily newspaper called “Lloyd’s News”(1734)
 Cond.

• Giving up-to-date news of everyday ship

movements, causalities and frights.
• It is common saying that anything can be insured at
Lloyds.
• Ex. Lloyds paid $1million dollars claims on the
sinking of the Titanic ship in 1912.
• $300 million for the damage by bombing of the
WTC in new york city etc
• The corporation of Lloyds was incorporated by the
Act of the parliament in 1871
• Even today it is the leading one in the whole of the
world
 Law-developments

• The marine insurance Act, 1906 was passed in

England and the Indian marine insurance
business was conducted according to the
provisions of the Act.
• Objects and reasons of 1906 Act:-
• Indian Navy and shipping have undergone
considerable expansion since Independence.
As there was no Indian legislation to govern, it
continued to be governed by this Act.
 Contd.,
• Insurance contracts in India also became the
subject of the Indian contract Act
• The insurance policy forms used in India were
the english forms based on mercantile
customs and conventions.
• conflicting with the provisions of Indian
contract Act, which resulted in different
interpretations by the courts.
• To overcome this difficulty the Indian Marine
Insurance Act, 1963 was enacted.
 Subject of Marine Insurance

• (1) property designated for export

• (2) imported property in the process of shipment
• (3) Domestic property in the process of shipment
• (4) property used to facilitate transportation, such
as bridges, tunnels, pipelines, and electrical
transmission towers
• (5) personal property that is easily moved and
typically of significant value such as jewellary, furs,
and cameras etc.
 Kinds of policies
• Transit Insurance:
• The finished goods when shipped from the
manufacturer to a whole seller or directly to a
departmental store (annual transit policy)
• Instruments of transportation cover bridges,
tunnels, pipelines, dams, and traffic signals
• Hull insurance:
• The hull means the body or frame of the ship or
vessel and its machinery. Thus this type of
insurance covers ship and its equipment's. The
ships or vessels may be classified as sea going
vessels, sailing vessels etc.
 Contd.
• The hull policies may also cover the risk while
the vessel is under construction.
• Cargo Insurance:-
• It means the goods carried on a ship. Cargo
insurance is taken in respect of the cargo
carried by the ship from one place to another
(voyage-course of travel by water or sea)
• It may be a ‘time policy’
• If it is for a particular voyage, known as ‘voyage
policy’ and there is no time limit
• There may be mixed time and voyage policies
 Contd.
• Freight Insurance:-
• The freight is the rent or amount paid for the
transportation of cargo.
• Generally the ship owner and the person receiving
the freight is one person. The freight could be paid in
advance or at the destination.
• U/s.14 of the M.I Act, if the freight has been paid in
advance it cannot be recovered in case the cargo is
lost during the voyage.
• Floating Policy:
• where the maximum amount of protection is
estimated for which the premium is payable in
advance which is adjustable at the end to the policy.
 Contd.

• Fleet policy:- which covers a number of vessels

under a single policy
• Other policies:-
• Sec-27:Time policy
• Sec-27: voyage policy
• Sec-29: Mixed time and voyage policy
• Sec-29: Valued policies
• Sec-30: Unvalued policies
• Sec-31: Floating policy
 Voyage and time policies

• (1) Where the contract is to insure the subject-

matter at and from, or from one place to another
or others, the policy is called a "voyage policy",
and where the contract is to insure the subject
-matter for a definite period of time, the policy is
called a "time policy" A contract for both voyage
and time may be included in the same policy.
• (2) A time policy which is made for any time
exceeding twelve months is invalid.
 Valued policy:-

• (1) A policy may be either valued or unvalued. 

• (2) A valued policy is a policy which specifies the
agreed value of the subject-matter insured.
• (3) Subject to the provisions of this Act, and in the
absence of fraud, the value fixed by the policy is, as
between the insurer and assured, conclusive of the
insurable value of the subject intended to be insured,
whether the loss be total or partial.
• (4) Unless the policy otherwise provides, the value
fixed by the policy is not conclusive for the purpose of
determining whether there has been a constructive
total loss.
 Cond.

• Unvalued policy:-
• An unvalued policy is a policy which does not specify the value
of the subject-matter insured, but subject to the limit of the
sum insured, leaves the insurable value to be subsequently
ascertained, in the manner hereinbefore explained.(insurable
value)
• Floating policy by ship or ships
• (1) A floating policy is a policy which describes the insurance in
general terms, and leaves the name or names of the ship or
ships and other particulars to be defined by subsequent
declaration.
• (2) The subsequent declaration or declarations may be made
by endorsement on the policy, or in other customary manner.
 Cond.

• (3) Unless the policy otherwise provides, the

declarations must be made in the order of dispatch or
shipment. They must, in the case of goods, comprise all
consignments within the terms of the policy and the
value of the goods or other property must be honestly
stated, but an omission or erroneous declaration may be
rectified even after loss or arrival, provided the omission
or declaration was made in good faith. 
• (4) Unless the policy otherwise provides, where a
declaration of value is not made until after notice of
loss or arrival, the policy must be treated as an unvalued
policy as regards the subject-matter of that declaration
 The Marine Insurance Act, 1963
• It consists of 93 sections which includes definition,
Insurable Interest, Insurable value, disclosure and
representation, the policy, double insurance,
warranties, voyage, assignment of policy, the
premium, lost and abandonment, measure of
indemnity, rights of insurer and at the end rules for
the construction of the policy
• Sec-3: definition of Marine Insurance:
• “A marine insurance is an agreement where by the
insurer undertakes to indemnify assured in the
manner and to the extent there by agreed, against
marine losses, that is to say the losses incidental to
marine adventure”
 Contd.
• (13A) of Insurance Act 1938: “marine insurance
business" means the business of effecting contracts
of insurance upon vessels of any description,
including cargoes, freights and other interests
which may be legally insured, in or in relation to
such vessels, cargoes and freights, goods, wares,
merchandise and property of whatever description
insured for any transit,
• by land or water, or both, and whether or not
including warehouse risks or similar risks in addition
or as incidental to such transit, and includes any
other risks customarily included among the risks
insured against in marine insurance policies;
 Contd.
• Definitions. 2. Definitions. In this Act, unless the
context otherwise requires,--
• (a)"contract of marine insurance" means a contract
of marine insurance as defined by section 3;
• (b) "freight" includes the profit derivable by a ship-
owner from the employment of his ship to carry his
own goods or other movables, as well as freight
payable by a third party, but does not include
passage money;
• (c) "insurable property "means any ship, goods or
other movables which are exposed to maritime
perils;
 Cond.
(d)"marine adventure" includes any adventure where
—
(i) any insurable property is exposed to maritime
perils;
(ii) the earnings or acquisition of any freight, passage
money, commission, profit or other pecuniary benefit,
or the security for any advances, loans, or
disbursements is endangered by the exposure of
insurable property to maritime perils
(iii) any liability to a third party may be incurred by the
owner of, or other person interested in or responsible
for, insurable property by reason of maritime perils;
 Contd.

• (e)“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,
captures, seizures, restraints and detainments of princes
and peoples, jettisons, barratry and any
other perils which are either of the like kind or may be
designated by the policy
(f) "movables" means any movable tangible property, other
than the ship, and includes
money, valuable securities and other documents;
• (g) "policy" means a marine policy;
• (h)"ship" includes every description of vessel used in
navigation;
• (i) "suit" includes counter-claim and set-off.
 Meaning of some imp. terms

• Jettisons: Voluntary throwing away the cargo

or any part of the vessel in the sea in order to
lighten the ship for the safe onward Journey.
• Barratry: It may be defined as a wrongful
willful act committed by the master.
• A fraud or gross negligence of a ships master.
• Ex: if the fire fraudulently set on the ship or
the cargo or theft is committed without the
knowledge of the owner it would amount to
barratry.
 Sec-4: Mixed sea and land risks.
.

(1)A contract of marine insurance may, by its express terms

or by usage of trade, be extended so as to protect the
assured against losses on inland waters or on any land
risk which may be incidental to any sea voyage.
(2) Where a ship in course of building, or the launch of a
ship, or any adventure analogous to a marine adventure,
is covered by a policy in the form of a marine policy, the
provisions of this Act, in so far as applicable,
shall apply thereto, but, except as by this section
provided, nothing in this Act shall alter or affect any rule
of law applicable to any contract of insurance other than
a contract of marine insurance as by this Act defined.
 Cond.

• Explanation:—
• "An adventure analogous to a marine
adventure" includes an adventure where any
ship, goods or other movables are exposed to
perils incidental to local or inland transit”.
• 5. Lawful marine adventure:
• Subject to the provisions of this Act, every
lawful marine adventure maybe the subject of
a contract of marine insurance
 Cond.

6. Avoidance of wagering contracts:-

(1) Every contract of marine insurance by way of wagering is void.

(2) A contract of marine insurance is deemed to be a wagering

contract--
(a) where the assured has not an insurable interest as defined by
this Act, and the contract is entered into with no expectation of
acquiring such an interest; or.
(b) where the policy is made "interest or no interest", or
"without further proof of interest than the policy itself", or
"without benefit of salvage to the insurer", or subject to any
other like term:

Provided that, where there is no possibility of salvage, a policy may

be effected without benefit of salvage to the insurer".
 Sec-7:Insurable Interest
(1) Subject to the provisions of this Act, every
person has an insurable interest who is interested
in a marine adventure.
(2) In particular a person is interested in a marine
adventure where he stands in any legal or
equitable relation to the adventure or to any
insurable property at risk therein, in consequence
of which he may benefit by the safety or due arrival
of insurable property, or may be prejudiced by its
loss, or by damage thereto, or by the detention
thereof, or may incur liability in respect thereof.
 Cond.

• Insurable Interest is that:

• (1) there must be a physical object which is
exposed to marine perils and
• (2) the assured must have some legally
recognized relationship with the object in
consequences of that he benefits its
preservation and is prejudiced by its loss or
damage
• The insurable interest may not be present at the
time of taking the insurance, but it must be
present at the time of loss of the subject matter
of the insurance.
 Cond.

• 8. When interest must attach

• (1) The assured must be interested in the subject-matter
insured at the time of the loss, though he need not be
interested when the insurance is effected:
• Provided that, where the subject- matter is insured "lost or
not lost", the assured may recover although he may not have
acquired his interest until after the loss,
• unless at the time of effecting the contract  of insurance the
assured was aware of the loss, and the insurer was not.
• (2) Where the assured has no interest at the time of the loss,
he cannot acquire interest by any act or election after he is
aware of the loss.
 Lost or Not lost clause-Meaning

• A clause used in ocean marine insurance which

states that the insurer will pay even if the loss
insured against has occurred prior to the
effecting of the insurance. The company would,
of course, not be liable if the policyholder knew
that the loss had occurred when ordering the
insurance.
• A ship could easily be lost or damaged and the
owner do not know until later, during which time
the owner might want to insure it, which is
possible with this clause.
 ‘lost or not lost’

• Thus, the law recognizes certain exceptions to the

general rule that the assured must have an
insurable interest at the time of the loss.
• First, if the policy offers cover on a ‘lost or not
lost’ basis, then the assured is, according to the
proviso to Section 8(1) permitted to recover
under the policy even though the loss was
sustained before the insurance was effected.
• This exception operates to protect an assured
who might have purchased goods without
knowing whether or not they have already been
lost at sea.
 Contd.

• Secondly, an assignee of a policy can acquire

an interest in the subject matter insured even
though the policy was assigned to him only
after the loss, provided of course, that the
assignor himself had, at the time of
assignment, an interest to assign.
 Instances of insurable Interest
• Defeasible or Contingent Interest (Sec-9):
• Section 9. Defeasible or contingent interest:
• (1) A defeasible interest is insurable, as also is a contingent interest.
• (2) In particular, where the buyer of goods has insured them, he has
an insurable interest, notwithstanding that he might, at his election,
have rejected the goods, or have treated them as at the seller’s risk,
by reason of the latter’s delay in making delivery or otherwise.
• Contingent interest is one which depends on chance. Defeasible
interest is that which is capable of being or liable to being, annulled
or undone
• According to this section a deafesible or contingent interest is
insurable
• In particular where the buyer of goods has insured them he has an
insurable interest (He can insured liability for salvage expenses,
liability for carriage of passengers, the liability of Jettison losses)
 INCOTERMS…Maritime related only
• CFR—Cost and Freight (named destination port)
• The seller clears the goods for export and pays
the costs and freight to the named port of
destination. The buyer bears risks of loss or
damage.
• CIF—Cost Insurance and Freight (named
destination port)
• The seller clears the goods for export and pays the
costs, cargo insurance, and freight to the named
port of destination. The buyer bears risks of loss
or damage.
 Cond.
• FAS—Free Alongside Ship (named loading port)
• The seller delivers the goods to the named port of
shipment. From that point the buyer bears all costs
and risks of loss or damage. This term is only used
for maritime transport but it's not used for
multimodal sea transport in containers. It's
typically used for heavy-lift or bulk cargo.
• FOB—Free on Board (named loading port)
• The seller delivers the goods on board the ship and
clears the goods for export. From that point the
buyer bears all costs and risks of loss or damage.
 Contd.

• Partial Interest:- A partial Interest of any nature is

insurable.
• ‘Any nature’ may include the interest in the ship, the
interest in the cargo or the interest in its freight.
• Re-insurance:
• (1) The insurer under a contract of marine insurance has
an insurable interest in his risk, and may re-insure in
respect of it.

(2) Unless the policy otherwise provides, the original

assured has no right or interest in respect of such re-
insurance.
 Contd.

• Bottomry and Respondentia:

• Bottomry loan refers to the mortgage of ship
• Respondentia loan refers to the mortgage of
cargo.
• “The money lender on bottomry or
respondentia has a insurable interest in
respect of loan”.
• Master and seaman’s wages: The master or
any member of the crew of the ship has an
interest in respect of his wage.
 Cond.
• Advance freight:-In the case of advance freight, the
person advancing the freight has an insurable
interest, in so far as such freight is not repayable in
case of loss.
• Ex: CIF
• Under CIF Incoterm, exporter has to pay for the
freight cost, which is necessary to bring the port of
loading to the port of discharge.
 Quantum of Interest

(1) Where the subject-matter insured is mortgaged, the

mortgagor has an insurable interest in the full value
thereof, and the mortgagee has an insurable interest in
respect of any sum due or to become due under the
mortgage.
(2) A mortgagee, consignee, or other person having an
interest in the subject-matter insured may insure on
behalf and for the benefit of other persons interested as
well as for his own benefit. 
(3) The owner of insurable property has an insurable
interest in respect of the full value thereof,
notwithstanding that some third person may have
agreed, or be liable to indemnify him in case of loss.
 Assignment of Interest
• A Marine Policy, unlike other non marine policy is
assignable unless it is restricted.
• Where the assured assigns or otherwise parts with his
interest in the subject-matter insured, he does not
thereby transfer to the assignee his rights under the
contract of insurance, unless there be an express or
implied agreement with the assignee to that effect.
• But the provisions of this section do not affect
transmission of interest by operation of law.
 Measure of Insurable value

• Subject to any express provision or valuation in

the policy, the insurable value of the subject-
matter insured must be ascertained as follows:- 
(1) In insurance on ship, the insurable value is the
value, at the commencement of the risk, of the
ship, including her outfit, provisions, and stores for
the officers and crew, money advanced for
seamen's wages, and other disbursements (if any)
incurred to make the ship fit for the voyage or
adventure contemplated by the policy, plus the
charges of insurance upon the whole: 
 Contd.

• The insurable value, in the case of a

steamship:- includes also the machinery,
boilers, and coals and engine stores if owned
by the assured;
• In the case of a ship driven by power other
than steam includes also the machinery and
fuels and engine stores, if owned by the
assured; and in the case of a ship engaged in a
special trade, includes also the ordinary
fittings requisite for that trade:
 Contd.

(2) In insurance on freight, whether paid in advance or

otherwise, the insurable value is the gross amount of
the freight at the risk of the assured, plus the charges of
insurance:
(3) In insurance on goods or merchandise, the
insurable value is the prime cost of the property
insured, plus the expenses of and incidental to shipping
and the charges of insurance upon the whole:
(4) In insurance on any other subject- matter, the
insurable value is the amount at the risk of the assured
when the policy attaches, plus the charges of insurance.
 Insurance is uberrimae fidei

A contract of marine insurance is a contract based upon the

utmost good faith, and if the utmost good faith be not
observed by either party, the contract may be avoided by the
other party.
Disclosure by assured:
1) Subject to the provisions of this section, the assured must
disclose to the insurer, before the contract is concluded, every
material circumstance which, is known to the assured, and
the assured is deemed to know every circumstance which, in
the ordinary course of business, ought to be known to him. If
the assured fails to make such disclosure, the insurer may
avoid the contract. 
(2) Every circumstance is material which would influence the
judgment of a prudent insurer in fixing the premium, or
determining whether he will take the risk.
 Contd.
3) In the absence of inquiry the following circumstances need not
be disclosed, namely:-
(a) any circumstance which diminishes the risk;
(b) any circumstance which is known or presumed to be known to
the insurer. The insurer is presumed to know matters of common
notoriety or knowledge, and matters which an insurer in the
ordinary course of his business as such, ought to know;
(c) any circumstance as to which information is waived by the
insurer;
(d) any circumstance which it is superfluous to disclose by reason
of any express or implied warranty.
(4) Whether any particular circumstance, which is not disclosed,
be material or not is, in each case,  question of fact.
(5) The term "circumstance" includes any communication made
to, or information received by, the assured.
 Disclosure by agent effecting Insurance

• Subject to the provisions of the preceding section as

to circumstances which need not be disclosed, where
an insurance is effected for the assured by an agent,
the agent must disclose to the insurer-
(a) every material circumstance which is known to
himself, and an agent to insure is deemed to know every
circumstance which in the ordinary course of business
ought to be known by, or to have been communicated
to, him; and
(b) every material circumstance which the assured is
bound to disclose, unless it comes to his knowledge too
late to communicate it to the agent.
 Illustration

• Condition of the vessel at the time of

commencement of the risk: It is normally
material for the insurer to know whether the
vessel is ready to sail or has already sailed,
• Again the date of sailing may be material
• The characteristics of the port including
whether the port is particularly subject to
delay will also be material facts.
• Nature of the vessel:- History of the vessel, its
background, its place of manufacture,
whether it was tested and demonstrated etc..
 Cond.
• Facts affecting voyage:- master has a record of
incompetence, the vessel should follow a route to its
destination which is usual.
• Estimated date of arrival at port
• When the contract is deemed to be concluded ?
A contract of marine insurance is deemed to be
concluded when the proposal of the assured is accepted
by the insurer,
whether the policy be then issued or not; and for the
purpose of showing when the proposal was accepted,
reference may be made to the slip, covering note or other
customary memorandum of the contract, although it be
unstamped.
 NIA Co.Ltd. v. Ramachandran And Co

• This revision petition was filed against the order

passed by the State Consumer Disputes Redressal
Commission, Andhra Pradesh whereby the State
Commission directed the petitioner to compensate
the losses
• The case of the respondent/ complainant before the
District Forum was that he had taken a marine policy
(Cargo) from the petitioner. The said policy was not
only renewed from time-to-time but the amount of
Rs. 10 lakhs which was in the year 1992 was increased
to Rs. 20 lakhs on 11.3.1992 and thereafter to Rs. 30
lakhs on 13.3.1992.
 Facts:

• During the subsistence of the policy,

complainant despatched on 17.4.1992, 274
bags of dry chilies weighing a total of 90
quintals in net, through Lorry to Delhi, the
consignee being M/ s. Ram Krishan Kailash
Chand, Commission Agent at Delhi.
• On 25.4.1992 the complainant learnt from
the 1st respondent that the driver of the said
Lorry sold away part of the consignment
goods en route about 17 quintals.
 Contd.

• The complainant/respondent thereafter took

possession of the remaining stock and lodged
a claim with the petitioner for the losses.
• The Surveyor visited the site and checked up
the record of the respondent and found that
value of stock which had been despatched by
the complainant was Rs. 48,73,500/- whereas
the policy was for Rs. 30,00,000/-.
• The petitioner accordingly repudiated the
claim and not informed the dispatch to
Insurance company as per condition
 Contd.

• The complainant alleged that right from

beginning on 9.1.1992, no policy was
delivered to him except cover note and
declaration forms. The conditions of the policy
relied upon by the petitioner, were admittedly
never communicated or otherwise made
known to him nor accepted by the
complainant.
 Condition as per the policy:

• The said condition No. 2 of the Marine Open Policy

reads as under:
"Warranted that until completion of this contract the
assured is bound to declare each and every dispatch
coming within the scope of the policy to the
company's office at Warangal in the declaration
sheet intended for this purpose within 24 hours of
the receipt of the relative documents of each
dispatch without any commission whatsoever. Should
the insured wilfully fail to report despatches covered
by this policy, the policy to all subsequent despatches
shall at the company's option stand null and void."
 Contd.

• The respondent-complainant submitted that

only the cover note and the schedule to the
insurance policy were supplied by the opposite
party and that the terms and conditions
incorporated in the standard policy had not
been communicated to the insured.
• The cover-note inter alia mentions that the risk
is subject to the usual terms and conditions of
the standard policy and it is equally the
responsibility of the respondent to call or these
terms and conditions even if they were not sent
by the appellant as alleged
 Contd.

• it is prima facie responsibility of the Insurance Company

who have knowledge about the terms of policy to
communicate the terms and conditions to the insured and
they cannot sit back after issuing the cover note. If they do
not do so within a reasonable time they do so at their own
peril.
• In the present case when Insurance Company not only
accepted the premium but also issued cover note on each
occasion when the value was enhanced had more than
enough time and opportunity to communicate the terms
and conditions to the insured.
• Even at the time of giving the declaration forms to the
insured they should tell the complainant that to cover the
risk, the declaration must be filed with the Insurance
Company of every consignment.
 Contd.
• No document has been pointed out wherein
the Insurance Company may have pointed out
that the limit applies to the total dispatches
whether declared or not.
• In that view of the matter Insurance Company
cannot take shelter behind this
uncommunicated clause and the Forum below
have rightly decided the case against it and
called upon the Insurance Company to
compensate the insured for the losses to the
extent mentioned above.
 Shree swastick trading co. v. O.I.C. Ltd.

• The Vessel, commenced its voyage from

Bombay to Beharin on 20.3.1995 at 20.30 hrs.
and the duration of the journey was about 8
days.
• On 27.3.1995, unfortunately, the vessel
capsized. The Complainant received the
information of the incident on 29.3.1995.
• That very day, Insurance company was
intimated and the claim was registered.
 Contd.

• The Oriental Insurance Co. Ltd objected for

the claims on the ground that Bill of Lading
dated 15.2.1995 with a 'Shipped on Board'
stamp submitted by complainant, whereas on
investigation it was found that loading of the
consignments actually took place between
March 9th to 14th, 1995.
• Since it was a case of pre-dating of loading
which was unlawful, and had taken the expert
opinions on the same issue.
 Contd.

The experts advised that the adventure had been carried out
by user of fraudulent documentation and that there has
been a breach of the implied warranty of legality in the
Marine Insurance Act and with the result the Insurance
Policy was unenforceable
• Section 25 of the Policy which requires that Policy must
specify :-
1) "the name of the assured, or of some person who effects
the insurance on his behalf;
2) the subject-matter insured and the risk insured against;
3) the voyage, or period of time, or both, as the case may be
covered by the insurance
4) the sum or sums insured;
5) the name of names of the insurer or insurers"
 Cond.

It is an admitted fact that all these details which

were material have been submitted.
The risk on the cargo commenced from the time it
was loaded on board the ship. It was mentioned in
one of the declarations that "ETD-8/3/95" and the
cargo was loaded only between 9th and 14th
March
The compliant objected by relying upon Clause (a)
of Sub Section (3) of Section 20 of the Act clearly
mentions that unless specifically enquired there is
no obligation on the part of the insured to disclose
such a circumstances which diminishes the risk.
 Contd.
• It is also common knowledge that in the shipping
industry, due to stiff competition to secure freight, the
ship owners/Agents do assist and co-operate with the
shippers by issuing Bill of Lading with "Shipped on
Board" endorsement without the goods being actually
loaded, to enable the shippers to negotiate the
documents and bill of the lading with Bankers within
the time limit fixed as per the letter of credit.
• This market practice is expected to/presumed to be
known to the insurer and the clause (b) sub-section (3)
of Section 20 of the Act, specified that such
circumstances which insurer is presumed to know need
not be disclosed unless specifically enquired from the
insured.
 Contd.

• Prof. E.R. Hardy Ivamy in his book, "Marine

Insurance" has quoted a classic old case 'Carter v.
Boehm (1766, 3 Burr 1905 at page 1910), in which
Lord Mansfield illustrated this point when he said:
• "The underwriter needs not be told what lessons
the risque agreed and understood to be run by the
express terms of the policy.... If he insures for
three years, he need not be told any
circumstances to show it may be over in two; or if
insures a voyage, with liberty of deviation, he
needs not be told what tends to show there will be
no deviation."
 Contd.

• Similarly, in the present case, the insurer did

not base the policy of insurance on the
statement of the goods tag "shipped on
Board" on 15.2.95 and it was not a material
fact/circumstances which could influence the
judgment of a prudent insurer in either fixing
the premium or in determining whether the
risk being taken or not”
• The commission directed insurance company
to pay the amount
 Representations Pending Negotiation Of Contract

(1) Every material representation made by the assured

or his agent to the insurer during the negotiations for
the contract, and before the contract is concluded,
must be true If it be untrue the insurer may avoid the
contract.
(2) A representation is material which would influence
the judgment of a prudent insurer in fixing the
premium, or determining whether he will take the risk.
(3) A representation may be either as to a matter of
fact, or as to a matter of expectation or belief.
 Cond.

• (4) A representation as to a matter of fact is true, if

it be substantially correct, that is to say, if the
difference between what is represented and what
is actually correct would not be considered
material by a prudent insurer.
• (5) A representation as to a matter of expectation
or belief is true if it be made in good faith.
• (6) A representation may be withdrawn or
corrected before the contract is concluded.
• (7) Whether a particular representation be
material or not, is, in each case, a question of fact.
 U.I.I.Co.Ltd. v. Andrew Vivera

• It is the case of the respondent that apart from

the policy of insurance he had taken monsoon
coverage in respect of the boat for one month.
• It was further stated that the boat was in good
condition. on 13-6-1981 the boat sailed from
Cochin with the members of the crew, and that
on 15-6-1981, he came to know that the boat
which was drifted away by violent waves met
with accident.
• The respondent sent notice claiming an amount
of Rs.69,735/- as damages from the petitioner.
 Contd.

• The boat was insured against the total loss, salvage charges
etc. The respondent says that he took up monsoon coverage
for one month with effect from 12-6-1981 through the
Development Officer.
• The surveyor who conducted the survey had auctioned the
engine of the boat and it was purchased by the respondent
himself for a sum of Rs. 15,401/- and claimed the balance
amount in the suit. The Ins.Co. filed written statement
contending that there was no policy for the monsoon
coverage and hence they are not liable to pay any amount
to the respondent.
• The respondent relies on Ext. A-5 to substantiate his
contention that he had paid the amount to the Insurance
Company for the monsoon coverage. Ext. A-5 is the receipt
obtained by the respondent.
 Contd.
• In the written statement Company only stated that
there is no contract to cover monsoon coverage and
so they are not liable to the plaintiff’s claim.
• In the written statement, they have not stated
neither Ext. A-5 is a bogus document nor it is invalid
or not stated that Charles was not a competent
officer to receive the premium. But in the evidence,
they contended that Ext. A-5 is the result of foul play.
• They have not adduced any evidence to prove that
Ext. A-5 cannot be acted upon.
• It is also pertinent to note that the suit notice
remained without any reply.
 Contd.

• Order 6, Rule 4, C.P.C. provides that in all cases in which the party
pleading relies on any misrepresentation, fraud, breach of trust,
willful default, or undue influence, and in all other cases in which
particulars may be necessary beyond such as are exemplified in the
forms aforesaid, particulars (with dates and items if necessary)
shall be stated in the pleading
• It is trite law that where allegations are made in a vague and
sweeping manner the Court cannot act on it for lack of specific
pleadings even if the allegations are worded in a very assertive
language.
• As Order 6, Rule 4 makes it incumbent upon a party to highlight all
particulars necessary to substantiate the contentions regarding
misrepresentation, fraud, breach of trust, willful default or undue
influence, a party cannot shirk that responsibility and shelve it to
be adduced in evidence at a later stage. If the pleadings are vague
and not specific no amount of evidence can salvage the position.
 Contd.
• There is hardly any evidence to hold that plaintiff was guilty of
suppression of any material facts when the proposal was made. And
there was no evidence to hold that the plaintiff committed any fraud
upon the defendants.
• Section 23 of the Marine Insurance Act provides that a contract of
marine insurance is deemed to be concluded when the proposal of
the assured is accepted by the insurer, whether the policy be then
issued or not; and for the purpose of showing when the proposal
was accepted, reference may be made to the slip, covering note or
other customary memorandum of the contract, although it be
unstamped.
• As Ext. A-5 shows that the amount of insurance was paid for the
monsoon coverage with effect from 12-6-1981 it is difficult to accept
the contention of the defendants that the plaintiff is not entitled to
claim the suit amount as no insurance policy as such was issued to
him.
• directed the Insurance company to pay remaining amount
 Double insurance

(1) Where two or more policies are effected by or on behalf

of the assured on the same adventure and interest or any
part thereof, and the sums insured exceed the indemnity
allowed by this Act, the assured is said to be over-insured by
double insurance.
(2) Where the assured is over-insured by double insurance-
(a) the assured, unless the policy otherwise provides, may
claim payment from the insurers in such order as he may
think fit, provided that he is not entitled to receive any sum
in excess of the indemnity allowed by this Act;
(b) where the policy under which the assured claims is a
valued policy, the assured must give credit as against the
valuation, for any sum received by him under any other
policy, without regard to the actual value of the subject-
matter insured;
 Cond.
(c) where the policy under which the assured
claims is an unvalued policy he must give credit,
as against the full insurable value, for any sum
received by him under any other policy;
(d) where the assured received any sum in
excess of the indemnity allowed by this Act, he
is deemed to hold such sum in trust for the
insurers, according to their right of contribution
among themselves
 NIA.Co.Ltd. v. Satish Solvent Ltd.

• The insured had an open marine transit policy

for a period of 12 months or till the sum
assured gets exhausted by declarations,
whichever is earlier.
• The condition of the policy was as under:-
• “It is a condition of this insurance that a assured
is bound and will declare each and every
dispatch coming under the scope of open policy
without any exception within 24 hrs or as may
be agreed from time of issue of the railway
receipt/lorry receipt/postal/air ways”
 Cond.

• The consignment of edible oil sent by the

insured got damaged and there fore claim was
preferred.
• It was found that the insured had sent
consignment worth of Rs.4.25 crores
• It was found that the insured had not given
declarations about all dispatches
• The commission held that it was a violation of
policy especially the condition mentioned in it
 Warranty

• The English law of marine insurance

warranties has been a focus for criticism
amongst academicians and the legal
professionals for many years.
• Under current English marine insurance law,
the concept of warranty refers to a terms of
the policy, which must be strictly complied
with by the insured, and any breach will
discharge the insurer from his liability
automatically as from the date of breach.
 Warranty
• Bank of Nova Scotia v. Hellenic Mutual War Risks
Association (Bermuda) Ltd (Good Luck Case)
• That breach of warranty would put the risk to an end
automatically as from the time of breach. This rule has
been held applicable to both marine and non-marine
insurance contracts. Breach of warranty is one of the
technical defences that insurers can use to defeat
liability for claims.
• The unique characteristic of warranty is that
materiality and causation are irrelevant. It is submitted
that the rationale of warranty is that the insurer only
accepts the risk provided that the warranty is fulfilled.
 Cond.

• The Ship named Good Luck was insured with

defendant and mortgaged the benefit of the
insurance in favour of petitioner’s bank
• The ship was sent to Arabian Guff in breach of
warranty and hit to Iraqi Missiles and become
constructive total loss
• Section-33(3) of the M.I. Act, 1906
 Jeffries v. Legandra (1692)

• In the case, the policy read that ‘warranted to depart with

convoy’. The ship departed with her convoy when she first
set sail but was later separated from the convoy by severe
weather and after that was captured by the French.
• The first issue for trial in the case was what the true
meaning of those words in the warranty were, i.e. to
depart with convoy at the commencement of the voyage
only or depart with convoy for the whole voyage.
• The court decided that these words should be construed
according to the usage among the merchants and the jury
found in favor of the insured on this point. It was held
that the words to ‘depart with convoy’, according to the
usage among the merchants, meant ‘sail with convoy for
the whole voyage’
 Cond.

• The real point of interest in this case was whether

the stipulation on departure with convoy was
satisfied if she was afterwards separated by
tempest or captured.
• The underwriter argued that the warranty made the
policy a conditional contract, ‘an executory promise
upon an act done, and to be done to, or by a
stranger’; and in such case it is not enough to say,
that ‘it was endeavoured, or that the circumstance
was rendered impossible to be observed by the act
of God’, and if the condition was prevented from
happening by the insured’s fault, the insured would
lose the premiums, if not, the contract was vitiated.
 Cond.
• However, the court did not take the underwriter’s arguments on
this point. They held that this undertaking would have been
satisfied in cases where the ship was forced to separate from the
convoy for reasons other than the willful default of the master
and therefore the insurer was liable for the loss.
• The Law in Lord Mansfield’s Time (1705-1793)
• Materiality:
• Woolmer v. Muilman, (1763) 1 Wm Bl 427
• The first recorded warranty case heard by Lord Mansfield, where
the insured ship and cargo were warranted to be neutral but
were in fact British property. The ship sank at sea, and the
underwriter refused to pay the claim.
• The insured argued that the warranty was not material to the
risk.
• The court held that the underwriter was not liable
 Cond.
• According to Lord Mansfield, there was a
falsehood, in respect to the condition of the
thing assured; therefore, it was not a
contract.…False warranty in a policy of
insurance will vitiate it, though the loss
happens in a mode not affected by that falsity.
• (So at that time, the court did not really
recognize the difference between warranties
and representations under utmost good faith
and confused the two)
 Difference Between Warranty And
Representation
• Pawson v. Watson, (1778) 2 Cowper 785-
• In this case, when the insured ship was represented to
the underwriter that the ship had 12 guns and 20 men
on board. However, the ship sailed with 27 men and
boys aboard, of whom only 16 were men, and nine
carriage guns and six swivels, which made the ship have
more force than it was represented.
• The ship was captured by an American privateer. The
insurers denied liability and the case turned on the
question….
• Whether the assured had warranted that the ship
should literally have 12 guns and 20 men?
 Cond.

• Lord Mansfield first pondered the distinction between a written

and a parol representation.
• Lord Mansfield said that, there is no distinction better known to
those who are at all conversant in the law of insurance, than that
which exists, between a warranty or condition which makes part
of a written policy, and a representation of the state of the case.
• Where it is a part of the written policy, it must be performed: as if
there be a warranty of convoy, there it must be a convoy: nothing
tantamount will do, or answer the purpose; it must be strictly
performed, as being part of the agreement; for there it might be
said, the party would not have insured without convoy.
• But as, by the law of merchants, all dealings must be fair and
honest, fraud infects and vitiates every mercantile contract.
Therefore, if there is fraud in a representation, it will avoid the
policy, as a fraud, but not as a part of the agreement.
 Difference.

• In this view of Lord Mansfield, warranties and

representation are different in two ways:
• Firstly, warranties were contractual, written in the
policy, whereas representations were merely
statements made during the negation of the
insurance and they were not necessarily included in
the policy;
• Secondly, warranties were different from
representations in their effects on breach. As in the
case, the instructions were not inserted or written
into the policy, they were held to be representations
and there was no fraud in the representation,
therefore the underwriters should be liable.
 Cond.

• The reasoning here seems to be that the

effect of misrepresentation is based on
fraud: material misrepresentation involves
fraud, so only material misrepresentation
will avoid the contract.
• By contrast, the breach of warranty is
based on contract, so even immaterial
breach of warranty is a breach of contract
and it will also avoid the contract.
Evolution Of Concept Of Excuse Of Warranty

• Another point that had also been considered again

in this century was that whether breach of warranty
can be excused if the breach of warranty was
caused by something out of the insured’s control ?
• Bond v. Nutt, (1777) 2 Cowp 601 ,
• The ship was warranted to have sailed on or before
a particular day. The ship actually sailed before that
date from her port of lading to another port to join
the convoy; however, the ship was later detained
there by an embargo beyond the date of sailing
warranted in the policy.
 Cond.

• The underwriter defended the case by arguing that

‘a strict departure by the precise day specified in
the policy, is of the very essence of the contract. It
is a condition precedent which must be complied
with, or the underwriter will not be liable’ and ‘it
is an express condition which neither storm nor
enemies, unless complied with, can excuse’.
• It is clear in the underwriter’s defence that the
breach of warranty cannot be excused whether the
breach is intentional or by accident, because strict
compliance of the warranty is the ground on which
the contract was based.
 Cond.
• Lord Mansfield directed them by saying that: -
• The policy was made … upon the contingency of a fact which must
have existed one way or the other at the time the policy was
underwritten.
• That contingency was, that the ship should have sailed on or
before the 1st of August…
• The question then is a matter of fact; and one that admits of no
latitude, no equity of construction, or excuse.
• Had she or had she not sailed on or before that day?
• No matter what cause prevented her; if the fact is, that she had
not sailed, though she stayed behind for the best reasons, the
policy was void: the contingency had not happened; and the party
interested had a right to say, there was no contract between them.
• (But at present as per the M.I.Act, 1963, the position is changed
and warranty can be excused)
 Lilly v Ewer, (1779) 1 Dougl 72

• In which the ship was also warranted to

depart with convoy but later was separated
from her convoy by perils of the sea.
• Lord Mansfield said that ‘though the convoy
for the whole voyage is clearly intended, an
unfortunate separation is an accident to which
the underwriter is liable.’
• This reasoning seems to say that accidental
separation is allowed to be not a breach of
warranty.
 The 19th Century—Rules of Implied
Warranties
• Warranties Of Seaworthiness And Legality
• In the beginning of the 19th century, the point
of seaworthiness was frequently considered in
the courts and it was held there was an
implied warranty of seaworthiness by law in
every voyage marine insurance contract
 Warranty of Seaworthiness

• Dixon v Sadler, (1839) 5 M & W 405-

• In the case of an insurance for a certain
voyage, it is clearly established that there is an
implied warranty that the vessel shall be
seaworthy,
• by which it is meant that she shall be in a fit
state as to repairs, equipment, and crew, and
in all other respects, to encounter the
ordinary perils of the voyage insured, at the
time of sailing upon it.
 Cond.

• If the assurance attaches before the voyage

commences, it is enough that the state of the ship
be commensurate to the then risk; and, if the
voyage be such as to require a different
complement of men, or state of equipment, in
different parts of it, as, if it were a voyage down
a canal or river, and hence across the open sea, it
would be properly manned and equipped for it.
• But the insured makes no warranty to the
underwriters that the vessel shall continue
seaworthy, or that the master or crew shall do
their duty during the voyage…
 Cond….

• There is seaworthiness for the port, seaworthiness in

some cases for the river, and seaworthiness in some
cases, as in a case that has been put forward of a
whaling voyage, for some definite, well-recognized,
and distinctly separate stage of the voyage.
• This principle has been sanctioned by various decisions;
but it has been equally well decided that the Vessel, in
cases where these several distinct stages of navigation
involve the necessity of a different equipment or state of
seaworthiness, must be properly equipped, and in all
respects seaworthy for each of these stages of the
voyage respectively at the time when she enters upon
each stage, otherwise the warranty of seaworthiness is
not complied with
 Cond.
• the standard of seaworthiness varies
according to the different voyages undertaken
and if the insured adventure is divided into
several stages,
• seaworthiness should be decided by reference
to the circumstances of each stage at the
commencement thereof.
• Indeed, the concept of seaworthiness is a
relative one and it really depends on the
circumstances in each and every case
 Legality
• In Gray v. Lloyd, (1812) 4 Taunt 136
• the British ship carrying goods from the Cape to the Isle of
Bourbon was lost by hostile capture.
• The underwriter rejected the claim on the ground of
illegality because the adventure was not confined to the
sort of goods specified in the license and the adventure
was also a breach of the monopoly of the East India
Company.
• The court held that it was an illegal voyage and
underwriter was not liable. It is interesting to note that the
court commented in this case that ‘it warranty of legality is
… an objection open for the underwriters to take, if they
choose it; though the objection, being a bare legal one, is
not to be favored.’
 Baines v. Holland, (1855) 10 Exch 802

• The ship was insured ‘at and from New York to

Quebec, … then to the United Kingdom.’
• The ship was warranted to sail from Quebec
on or before 1st November 1853. Before the
ship arrived at Quebec, it struck certain rocks
and was totally lost.
• The loss happened after 1st November, when
the ship was still at sea on her way from New
York to Quebec, due to the late
commencement of her voyage.
 Cond.

• ‘So far as relates to the voyage from New York

to Quebec, the policy is altogether without
limitations as to time; but as regards the
voyage from Quebec to the United Kingdom,
the underwriters are not responsible unless
the vessel sails from Quebec on or before the
1st of November, 1853.’
• The 1st of November 1853 is a condition
precedent to the attaching of the risk
 Cond.

• In policies of marine insurance I think it is

settled by authority that any statement of a
fact bearing upon the risk introduced into the
written policy is, by whatever words and in
whatever place, to be construed as a warranty,
and prima facie, at least that the compliance
with that warranty is a condition precedent to
the attaching of the risk
 Whether Breach Of Warranty Can Be
Remedied Before Loss.
• Weir v Aberdeen, (1819) 2 B & Ald 320
• ‘… if a vessel, at the outset of her voyage, be
by mistake or accident unseaworthy, owing to
some defect which is immediately discovered,
and remedied before any loss happens in
consequences of it, still that the policy would
be void, and the underwriters not liable.’
 Cond.

• Quebec Marine Insurance Co. v Commercial

Bank of Canada, (1870) L.R. 3 P.C 234
• There was a defect in the boiler of the vessel,
after being repaired and detained for some
days in the port, she proceeded to sea, where
she was lost in bad weather. The court held
that the warranty of seaworthiness had not
been complied with, although the defect was
afterwards repaired.
 The MI Act, 1906

• Due to the drafting efforts of Sir M. D. Chalmers, a Bill

entitled the ‘Marine Insurance Codification Bill’ was
introduced in the House of Lords in 1894. Eventually,
the Act under the title of ‘An Act to Codify the Law
relating to Marine Insurance’ was enacted in 1906.
• As the name indicates, it did not set out to remodel
the law relating to marine insurance, but merely to
codify previous decisions and customary practice.
• In Marine Insurance Act, 1906-Sections 33-41 set out
the rules of the warranties.
• A warranty is a promise by the insured to the
underwriter that something shall or shall not be done,
or that a certain state of affairs does or does not exist
 Cond.

• A warranty must be literally and strictly complied with,

as otherwise subject to the two statutory exceptions,
• (a) where owing to a change of circumstances the
warranty is no longer applicable, and
• (b) where compliance would be unlawful owing to the
enactment of a subsequent law, the underwriter is
discharged from liability as from the date of the
breach.
• A breach of warranty may be waived by the
underwriter.
• The Act also provides that warranties can be express
or implied
 Section-35: Nature of warranty of the Marine Insurance Act, 1963

(1) A warranty, in the following sections relating to warranties,

means a promissory warranty, that is to say a warranty by
which the assured undertakes that some particular thing
shall or shall not be done, or that some condition shall be
fulfilled, or whereby he affirms or negatives the existence
of a particular state of facts.
(2) A warranty may be express or implied.
(3) A warranty, as above defined, is a condition which must be
exactly complied with, whether it be material to the risk or
not. If it be not so complied with, then, subject to any express
provision in the policy, the insurer is discharged from liability
as from the date of the breach of warranty, but without
prejudice to any liability incurred by him before that date.
 Relevant Provision under MI Act, 1906

• Sec 33(3) of M. I Act, 1906 states that,

• A warranty, as above defined, is a condition
which must be exactly complied with, whether
it be material to the risk or not.
• The remaining words which had been found in
Indian MI Act, 1963 has been deleted.
• (Words in s. 33(3) omitted dated, 12.8.2016 by
virtue of Insurance Act, 2015)
Exact Compliance-Literal but not necessarily
substantial
• Overseas Commodities Ltd. v Style, [1958] 1 Lloyd’s
Rep. 546
• The insured shipped two consignments of tinned pork
from France to London under an all risk policy.
• The policy contained a warranty which required that
all the tins of pork should be marked by the
manufacturers with their date of manufacture.
• while a portion of the tins were actually not marked.
When the tins were delivered, many of them were
found to be rusty or broken.
• The court held that insurer was not liable
 Cond.

• Yorkshire Insurance Company v Campbell,

[1917] A C 218
• The horse insured for the transit on sea was
misstated to be a certain pedigree.
• The pedigree of the horse was material as a
horse of one particular pedigree might be
more vulnerable to the sea than the other.
• The Privy Council held that this was a warranty
and it was broken.
• Insurance co is not liable
 Causation between loss and breach not
required
• Forsikringsaktieselskapet Vesta v. Butcher, [1989] 1 Lloyd’s
Rep 331
• The policy had a warranty that there will be a 24-hour
watch over the insured fish farm.
• One night all the fish was swept out of the farm by a
heavy storm, and there was no watchman on duty as
warranted.
• Although it was acknowledged that no watchman could
prevent the loss in any event, the House of Lords held that
under English law the insured’s failure to maintain such a
watch discharged the underwriters from their liability.
 Cond.

• Brownswille Holdings Ltd v. Adamjee Insurance

Co. Ltd (The Milasan), [2000] 2 Lloyd’s Rep. 458
• The insurer suspected that the yacht was
deliberately scuttled by the claimant and
therefore rejected his claim.
• The company denied liability on many grounds
and one of them was breach of warranty
requiring professional skippers and crew to be
in charge of the yacht at all times.
• The court held that, insurer is not liable
 Automatic Discharge of Liability

• Bank of Nova Scotia v. Hellenic Mutual War

Risks Association (Bermuda) Ltd (Good Luck
Case)
• As required by the mortgage, the benefit of the
insurance was assigned to the bank, and the club
gave a letter of undertaking to the bank, whereby
the club promised to advise the bank promptly if
the club ceased to insure the ship.
• The ship was sent to the Arabian Guff in breach
of warranty under the insurance, was hit by Iraqi
missiles and became a constructive total loss
 Cond.
• That breach of warranty would put the risk to an end
automatically as from the time of breach.
• This rule has been held applicable to both marine
and non-marine insurance contracts. Breach of
warranty is one of the technical defences that
insurers can use to defeat liability for claims.
• The unique characteristic of warranty is that
materiality and causation are irrelevant.
• The rationale of warranty is that the insurer only
accepts the risk provided that the warranty is
fulfilled.
 Section-36: Excuse of breach of warranty

(1) Non-compliance with a warranty is excused when

by reason of a change of circumstances, the warranty
ceases to be applicable to the circumstances of the
contract, or when compliance with the warranty is
rendered unlawful by any subsequent law.
(2) Where a warranty is broken, the assured cannot
avail himself of the defense that the breach has been
remedied, and the warranty complied with, before
loss.
(3) A breach of warranty may be waived by the insurer
(S. 34 omitted dated 12.8.2016 by virtue of Insurance
Act 2015 in the MI Act, 1906)
 Express warranties

(1) An express warranty may be in any form of words

from which the intention to warrant is to be
inferred. 
(2) An express warranty must be included in, or
written upon the policy, or must be contained in
some document incorporated by reference into the
policy.
(3) An express warranty does not exclude implied
warranty, unless it be inconsistent therewith.
 Cond.

• Warranty of neutrality:
(1) Where insurable property, whether ship or
goods, is expressly warranted neutral, there is
an implied condition that the property shall
have a neutral character at the commencement
of the risk, and that , so far as the assured can
control the matter, its neutral character shall be
preserved during the risk.
 Cond.
2) Where a ship is expressly warranted "neutral",
there is also an implied condition that, so far as the
assured can control the matter she shall be properly
documented, that is to say, that she shall carry the
necessary papers to establish her neutrality, and that
she shall not falsify or suppress her papers, or use
simulated papers If any loss occurs through breach of
this condition, the insurer may avoid the contract.
No. implied warranty of nationality
There is no implied warranty as to the nationality of a
ship or that her nationality shall not be changed
during the risk.
 Cond.

• Warranty of good safety

Where the subject-matter insured is warranted
"well" or "in good safety" on a particular day, it is
sufficient if it be safe at any time during that day.
• Warranty of legality
• There is an implied warranty that the adventure
insured is a lawful one, and that, so far as the
assured can control the matter, the adventure
shall be carried out in a lawful manner.
 Warranty of seaworthiness of ship

(1) In a voyage policy there is an implied warranty that at the

commencement of the voyage the ship shall be seaworthy
for the purpose of the particular adventure insured. 
(2) Where the policy attaches while the ship is in port, there
is also an implied warranty that she shall, at the
commencement of the risk, be reasonably fit to encounter
the ordinary perils of the port. 
(3) Where the policy relates to a voyage which is performed
in different stages, during which the ship requires different
kinds of  or further preparation or equipment, there is an
implied warranty that at the commencement of each stage
the ship is seaworthy in respect of such preparation or
equipment for the purposes of that stage.  
 Cond.

(4) A ship is deemed to be seaworthy when she

is reasonably fit in all respects to encounter the
ordinary perils of the seas of the adventure
insured. 
(5) In a time policy there is no implied warranty
that the ship shall be seaworthy at any stage of
the adventure, but where, with the privity of
the assured, the ship is sent to sea in an
unseaworthy state, the insurer in not liable for
any loss attributable to unseaworthiness.
 Voyage

• Meaning of Voyage
• Section-44 to 51
 Voyage (Secs.44-51)

Section-44: Implied condition as to commencement of

risk
(1) Where the subject-matter is insured by a voyage policy
"at and from" or "from" a particular place, it is not
necessary that the ship should be at that place when the
contract is concluded, but there is an implied condition
that the adventure shall be commenced within a
reasonable time, and that if the adventure be not so
commenced the insurer may avoid the contract.
(2) The implied condition may be negative by showing
that the delay was caused by circumstances known to the
insurer before the contract was concluded, or by showing
that he waived the condition.
 Cond.

Sec-45: Alteration of port of departure

Where the place of departure is specified by the
policy, and the ship instead of sailing from that
place sails from any other place, the risk does
not attach.
Sec-46: Sailing for different destination
Where the destination is specified in the policy,
and the ship, instead of sailing for that
destination, sails for any other destination, the
risk does not attach.
 Sec-47: Change Of Voyage & Discharge Of Liability

(1) Where, after the commencement of the risk,

the destination of the ship is voluntarily changed
from the destination contemplated by the policy,
there is said to be a change of voyage.
(2) Unless the policy otherwise provides, where
there is a change of voyage, the insurer is
discharged from liability as from the time of
change, that is to say, as from the time when the
determination to change it is manifested; and it is
immaterial that the ship may not in fact have left
the course of voyage contemplated by the policy
when the loss occurs
Sec-48: Meaning of Deviation & Discharge of Liability
(1) Where a ship, without lawful excuse, deviates from the
voyage contemplated by the policy, the insurer is discharged from
liability as from the time of deviation, and it is immaterial that the
ship may have regained her route before any loss occurs.
(2) There is a deviation from the voyage contemplated by the
policy-
(a) where the course of the voyage is specifically designated by
the policy, and that course is departed from; or
(b) where the course of the voyage is not specifically designed by
the policy, but the usual and customary course is departed from.

(3) The intention to deviate is immaterial; there must be a

deviation in fact to discharge the insurer from his liability under
the contract.
 Sec-49: Several Ports of discharge and Deviation
• (1) Where several ports of discharge are specified by
the policy, the ship may proceed to all or any of
them, but, in the absence of any usage or sufficient
cause to the contrary, she must proceed to them, or
such of them as she goes to, in the order designated
by the policy. If she does not there is a deviation.
• (2) Where the policy is to"ports of discharge",
within a given area, which are not named, the ship
must, in the absence of any usage or sufficient cause
to the contrary, proceed to them, or such of them as
she goes to, in their geographical order. If she does
not there is a deviation.
 What is Delay

• Sec-50: Delay in voyage.—In the case of a

voyage policy,
• the adventure insured must be prosecuted
throughout its course with reasonable
dispatch, and,
• if without lawful excuse it is not so
prosecuted, the insurer is discharged from
liability as from the time when the delay
became unreasonable.
 Sec-51: Excuse for deviation or delay
• (1) Deviation or delay in prosecuting the voyage
contemplated by the policy is excused-
• (a) where authorised by any special term in the
policy; or
• (b) where caused by circumstances beyond the
control of the master and his employer; or
• (c) where reasonably necessary in order to
comply with an express or implied warranty; or
• (d) where reasonably necessary for the safety
of the ship or subject- matter insured; or
 Cond.
• (e) for the purpose of saving human life or aiding a
ship in distress where human life may be in danger; or
• (f) where reasonably necessary for the purpose of
obtaining medical or surgical aid for any person on
board the ship; or
• (g) where if barratry be caused by the barratrous
conduct of the master or crew, one of the perils
insured against.
• (2) When the cause excusing the deviation or delay
ceases to operate, the ship must resume her course,
and prosecute her voyage, with reasonable despatch
 Loss and Abandonment
• Proximate Cause and Included and Excluded
Clauses
• (1) Subject to the provisions of this Act, and
unless the policy otherwise provides, the
insurer is liable for any loss proximately
caused by a peril insured against, but, subject
as aforesaid, he is not liable for any loss which
is not proximately caused by a peril insured
against.
 Cond.
• (2) In particular-
• (a) the insurer is not liable for any loss attributable to
the wilful misconduct of the assured, but, unless the
policy otherwise provides, he is liable for any loss
proximately caused by a peril insured against, even
though the loss would not have happened but for the
misconduct or negligence of the master or crew;
• (b) unless the policy otherwise provides, the insurer
on ship or goods is not liable for any loss proximately
caused by delay, although the delay be caused by a
peril insured against;
 Cond.

• (c) unless the policy otherwise provides, the

insurer is not liable for ordinary wear and
tear, ordinary leakage and breakage, inherent
vice or nature of the subject-matter insured,
• or for any loss proximately caused by rats or
vermin,
• or for any injury to machinery not
proximately caused by maritime perils
 Partial and total loss

• (1) A loss may be either total or partial.

• Any loss other than a total loss, as hereinafter
defined, is a partial loss.
• (2) A total loss may be either an actual total
loss, or a constructive total loss.
• (3) Unless a different intention appears from
the terms of the policy, an insurance against
total loss includes a constructive, as well as
an actual, total loss.
 Cond.

• (4) Where the assured brings a suit for a total

loss and the evidence proves only a partial
loss, he may,
• unless the policy otherwise provides, recover
for a partial loss.
• (5) Where goods reach their destination in
specie, but by reason of obliteration of marks,
or otherwise, they are incapable of
identification, the loss, if any, is partial and
not total.
 Actual total loss

• Actual total loss—

• (1) Where the subject-matter 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 is an actual total loss.
• (2) In the case of an actual total loss no notice
of abandonment need be given
 Constructive Total Loss

(1) Subject to any express provision in the policy,

there is a constructive total loss
• where the subject-matter insured is
reasonably abandoned on account of its actual
total loss appearing to be unavoidable,
• or because it could not be preserved from
actual total loss without
• an expenditure which would exceed its value
when the expenditure had been incurred.
 Cond.

(2) In particular, there is a constructive total loss—

(i) where the assured is deprived of the possession of
his ship or goods by a peril insured against, and
• (a) it is unlikely that he can recover the ship or goods,
as the case may be, or
• (b) the cost of recovering the ship or goods, as the
case may be, would exceed their value when
recovered; or
(ii) in the case of damage to a ship, where she is so
damaged by a peril insured against that the cost of
repairing the damage would exceed the value of the
ship when repaired.
 Cond.

• In estimating the cost of repairs, no deduction

is to be made in respect of general average
contributions to those repairs payable by
other interests, but account is to be taken of
the expense of future salvage operations and
of any future general average contributions to
which the ship would be liable if required; or
• (iii) In the case of damage to goods, where the
cost of repairing the damage and forwarding
the goods to their destination would exceed
their value on arrival.
 Cond.

• Effect of constructive total loss.—Where

there is a constructive total loss the assured
may either
• treat the loss as a partial loss, or abandon the
subject-matter insured to the insurer and treat
the loss as if it were an actual total loss.
 Notice of abandonment

• Where the assured elects to abandon the

subject matter insured to the insurer, he must
give notice of abandonment and if fails to do
so, the loss can only be treated as a partial
loss.
• Notice of the abandonment may be given in
writing or by words of mouth or partly in
writing and partly by words of mouth
• Notice must be properly given, the rights of the
assured are not prejudiced by the fact that the
insurer refuses to accept the abandonment.
 Contd.

• The acceptance of an abandonment may be

express or implied from the conduct of the
insurer
• where the notice of the abandonment is
accepted, it is irrevocable
• Where the insurer has reinsured the risk, no
notice of abandonment need to be given to
him.
 Effect of abandonment and operation of
subrogation

• Sec-63: (1) If there is a valid abandonment, the insurer is

entitled to take over the interest of the assured in
whatever may remain of the subject-matter insured, and
all proprietary rights incidental there to.
• (2) Upon the abandonment of a ship, the insurer thereof
is entitled to any freight in course of being earned, and
which is earned by her subsequent to the casualty
causing the loss, less the expenses of earning it incurred
after the casualty; and, where the ship is carrying the
owner’s goods, the insurer is entitled to a reasonable
remuneration for the carriage of them subsequent to the
casualty causing the loss.
 Partial Loss

• Particular average loss—

• (1) A particular average loss is a partial loss of the
subject-matter insured, caused by a peril insured
against, and which is not a general average loss.
• (2) Expenses incurred by or on behalf of the
assured for the safety or preservation of the
subject-matter insured, other than general
average and salvage charges, are called particular
charges.
• Particularly charges are not included in particular
average.
 Partial loss-Salvage charges
• (1) Subject to any express provision in the policy, salvage
charges incurred in preventing a loss by perils insured
against may be recovered as a loss by those perils.
• (2) “Salvage charges” means the charges recoverable
under maritime law by a salvor independently of contract.
• They do not include the expenses of services in the nature
of salvage rendered by the assured or his agents, or any
person employed for hire by them, for the purpose of
averting a peril insured against.
• Such expenses, where properly incurred, may be
recovered as particular charges or as a general average
loss, according to the circumstances under which they
were incurred
 General Average
• (1) 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 average sacrifice.
• (2) There is a general average 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 imperilled in the
common adventure.
• (3) Where there is a general average loss, the party on whom it falls is
entitled, subject to the conditions imposed by maritime law, to a
rateable contribution from the other parties interested, and such
contribution is called a general average contribution.
• (4) Subject to any express provision in the policy, where the assured has
incurred a general average or expenditure, he may recover from the
insurer in respect of the proportion of the loss which falls upon him;
and in the case of a general average sacrifice, he may recover from the
insurer in respect of the whole loss without having enforced his right of
contribution from the other parties liable to contribute.
 Cond.

• (5) Subject to any express provision in the policy, where the

assured has paid, or is liable to pay, a general average
contribution in respect of the interest insured, he may
recover therefor from the insurer.
• (6) In the absence of express stipulation, the insurer is not
liable for any general average loss or contribution where the
loss was not incurred for the purpose of avoiding, or in
connection with the avoidance of a peril insured against.
• (7) Where ship, freight, and cargo, or any two of those
interests, are owned by the same assured, the liability of the
insurer in respect of general average losses or contributions
is to be determined as if those interests were owned by
different person
 CIF Contract
• Lord Atkinson in Johnson v Taylor Bros & Co Ltd, [1920] AC
144
• Contract on CIF (cost, insurance, freight) terms, shifts burden
of responsibilities in international sale transaction onto the
seller’s side, who is to do the following things:-
• Firstly, to make out an invoice of the goods sold.
• Secondly, to ship at the port of shipment goods of the
description contained in the contract.
• Thirdly, to procure a contract of affreightment under which
the goods will be delivered at the port contemplated by the
contract.
• Fourthly, to arrange for an insurance upon the terms current
in the trade which will be available for the benefit of the buyer.
 Cond.

• Fifthly, with all reasonable dispatch to send forward and

tender to the buyer these shipping documents, namely,
the invoice, bill of lading and policy of assurance,
delivery of which to the buyer is symbolical of delivery
of the goods purchased, placing the same at the buyer’s
risk and entitling the seller to payment of the price.
• Thus, in a cif contract, the seller makes all of the
shipping arrangements.
• The buyer’s duty is to pay the price on the tender
of documents covering those goods, to take delivery and
to pay import duty.
• Physical delivery of the goods is not a condition of cif
contract.
 Cond.
• …the object and the result of a c.i.f. contract is to enable
sellers and buyers to deal with cargoes or parcels afloat
and to transfer them freely from hand to hand by giving
constructive possession of the goods which are being dealt
with.
• In other words, cif terms allows international traders to
sell and resell commodities several times while they are
afloat under so-called chain contracts.
• Accordingly, physical delivery is an indispensable requisite
of a final sale contract only, while all
intermediate transactions done by passing the property
from the seller to the buyer with shipping documents and
not with goods.
 Cond.
• Scrutton J in Arnold Karberg & Co v. Blythe, Green
Jourdain & Co, [1915] 2 K.B. 379
• So far as physical arrival of the goods to the buyer is not a
condition of cif contract, it does not mean that the goods
may never have been shipped, on the contrary, only
provided they are shipped and available for trade there is
no requirement that they actually arrive for the buyer to
pay price Once the goods shipped, the sale contract can be
nevertheless concluded even if they have been lost in
transit.
 Insurance Liability

• Set of shipping documents generally consist of:-

• a clean bill of lading,
• a marine insurance policy or
• certificate covering the usual marine risks and any agreed
additional risks
• plus an invoice.
• Thus, the bill of lading and the insurance policy provides
continuous cover from the port of shipment to the port of
discharge,
• so that the c.i.f. buyer, whatever happens to the goods, will
have either a cause of action for loss or damage to the goods
under bill of lading contract against:
i) the carrier under the contract of carriage, and
ii) the insurer under the policy of insurance.
 Free on board

• President of India v. Metcalfe Shipping Co [1970] 1 Q.B.

289, CA
• The term fob stands for "free on board" and represents
a type of sale contracts under which the buyer generally
takes all the risks and expenses from the moment the
goods crossed ship’s rail.
• When the goods sold on fob terms the buyer is to
nominate the ship and the seller undertakes to place
the goods on board of ship at an agreed port of
shipment.
• The seller bears all expenses and charges related to
delivery of the goods on board of ship, and also he is
under the duty to obtain export license.
 Cond.
•  Shipping:
• The stores shall be delivered by the sellers free on board
stowed on such vessels as may be nominated by the
purchaser.
• Inspection certificates, advice notes, packing accounts
and invoices in such manner as may be required by the
Director-General, India Store Department, shall be
furnished by and at the cost of the sellers.
• The term ‘FOB vessel port of loading’ means:
(a) Loaded and stowed or trimmed on board overseas
vessel at named port of loading, free of expense to
purchaser.
 Contd.

(b) That it shall be the responsibility of the sellers to do the

following:

(i) provide for and pay and bear all charges incurred in
placing goods actually on board the vessel designated and
provided by purchaser on the date or within the period
fixed;
(ii) provide clean on board ocean bill of lading;
(iii) be responsible for any loss or damage or both until
goods have been placed actually on board the vessel on the
date or within the period fixed and clean on board
ocean bill of lading is delivered to the purchasers or the
agent nominated by purchasers;
 Contd.

• (iv) render purchaser or his authorized agents

assistance in obtaining the documents issued
in the country of origin or of shipment, or of
both, which may be required for purpose of
exportation.…
• The buyer pays all subsequent charges
including cost of stowage of the goods on
board ship, freight and marine insurance, all
expenses related to unloading of the goods at
the destination, import duties and consular
fees.
 Cond.

• Hewart C.J. in J. & J. Cunningham, Ltd. v.

Robert A. Munro & Co., Ltd. (1922) 13 Ll. L.
Rep. 216
• Under such an agreement it was the duty of
the purchasers to provide a vessel at the
appointed place, at such a time as would
enable the vendors to bring the goods
alongside the ship and put them over the
ship’s rail, so as to enable the purchasers to
receive them within the appointed time
 Cond.

• The usual practice under such a contract is for

the buyer to nominate the vessel and to send
notice of her arrival to the vendor in order
that the vendor may be in a position to fulfil
his part of the contract.
• When the vendors tender the goods in
question to the purchasers theoretically by
placing them on the ship’s rail, it is open to the
purchasers to reject if the goods are not in
accordance with the contract.
 Rejecting the goods…..
• The relationship between the parties the
liability on either side may be varied
(1) by express contract altering the place or
date of loading
(2) by the conduct of the parties.
• Ex. The vendors gather their vegetables and
send them to the port; but the nominated ship
does not arrive for a fortnight, during which
time the vegetables go bad.
 Cond.

• Soufflet Negoce S.A. v Bunge S.A. [2010] EWCA Civ 1102

• Buyer has a right, but not duty to examine the goods
upon delivery to him at the place of destination and
reject them if they do not meet contractual
specification.
• Risk of loss or damage passes from the seller to the
buyer on the loading of the goods onto the vessel.
• If the buyer assumes the risk of loading the cargo into
unclean holds the seller cannot reject loading on the
basis that holds are not clean enough, because the
state of the holds is not a matter in which he has any
real legitimate interest.
 Cond.

• For example, there may be circumstances which

disentitle the purchaser to reject the goods
when they are being placed on the ship’s rail, as
for instance where he has by his conduct already
accepted them before their arrival there;
• There may also be circumstances where,
although the purchaser may be entitled to reject
when the goods are being placed over the ship’s
rail, yet the vendor may be entitled to recover
damages in respect of the deterioration of the
goods.
 National Insurance Co. Ltd v. Sky Gems

• It is an appeal by National Insurance Co

against M/s Sky Gems against the judgment
passed by the National Consumer Disputes
Redressal Commission
• The respondent-Sky Gems exported two
parcels of precious stones (Emerald) to
London through the Foreign Post Office, New
Delhi and However, the consignment did not
reach the consignee and was believed to have
been either stolen or lost in transit.
 Cond.

• The respondent had taken two insurance policies from

the appellant-insurance company.
• The total sum assured was Pound Sterling 85,740.55
(CIF value + 10%).
• M/s. W.K. Webster & Company, London, were
appointed as investigators and their report confirmed
that the consignment had either been lost or stolen.
Non-delivery certificate was issued by the Department
of Posts (Foreign Post), New Delhi, in respect of the
consignment.
• The postal authorities admitted their liability and made
payment at the rate of Rs. 10,254.50 for each parcel
 Cond.

• In respect of the two policies obtained from

the appellant-insurance company, respondent
preferred a claim and the appellant agreed to
settle the same for Rs. 28,30,000.
• The respondent claimed from the appellant an
amount of Pounds Sterling 1,07,175.60 and
insisted that the payments be made in
Pounds.
 Contd.

• For some reason or the other, there was a delay

in settlement of the claim and the respondent
filed a petition before the National Commission.
• The appellant resisted the claim and contended
that it was not liable to pay the respondent in
Pounds Sterling.
• It was also contended that as the title in the
goods had not passed to the consignee, the
respondent continued to be the owner of the
goods and, therefore, the payment could be
effected only in Indian currency.
 Cond.

• The National Commission held that as the insurance policies clearly

stated that the claim was "payable at London" and the declared
invoice value and the insured value of the consignments were in
terms of Pounds Sterling, the appellant was liable to pay to the
respondent in Pounds Sterling and ultimately ordered the appellant
to pay Pounds Sterling 85,740/- + 10% or Pounds Sterling 94,314/-
• The respondent was also held entitled to recover interest at the
rate prevalent on commercial borrowings in U.K. from time to time.
• The appellant was entitled to adjust the amount of Rs. 20,000
received as compensation from the postal authorities. A sum of Rs.
50,000/- was also ordered as compensation for delayed payment.
This Order of the National Commission has been challenged
before supreme court
 Supreme court observations
• The consignee of these goods had approached M/s. W.K.
Webster & Company for the settlement of the claim and
there was correspondence between the consignee and M/s.
W.K. Webster & Company.
• Accordingly It was found that as per the letter dated 2nd
April, 1991, M/s. W.K. Webster & Co had asked the consignee,
M/s Emdico (London) Limited, for the original Policies of
Insurance together with all correspondence exchanged with
the postal authorities concerning their liability, and also a
clarification as to whether they had remitted full payment of
the value of the missing merchandise to the Indian suppliers.
• In another letter dated 20th June, 1991, M/s. W.K. Webster &
Co. offered to settle the claim as soon as they received the
necessary documentation from India
 Contd.
• The consignee, Emdico (London) Limited, sent a reply
to M/s. W.K. Webster & Co. on 8th April, 1991 and
the last paragraph of their letter reads as follows:-
• "As regards the question whether we have remitted
full payment of the value of the missing merchandise
to our Indian suppliers, the answer is that we
haven't done so and we suggest that the settlement
may be concluded directly with Sky Gems in India,
however, if you will feel it is more convenient for you
to deal with us as the consignees of the goods, we
shall be happy to do so. One way or the other, it
doesn't seem to make much difference."
 Contd.

• It is evident that the consignee, Emdico

(London) Limited, did not pay the value of the
missing merchandise
• “There is no evidence to show that the
necessary documents were endorsed in favour
of the consignee and that they were transferred
to them. These facts will show that the title to
the goods in question had not passed to the
consignee, M/s. Emdico (India) Limited and the
Sky Gems Ltd continued to be the owner
having insurable interest over the goods”
 Cond.

• The respondent contended that the goods were

sent on CIF contract and the moment the goods
were consigned, the title would pass to the
consignee.
• The court observed that, It is true that the goods
are ascertained, but even then the title would
pass based on the contract between the parties.
• The rights and liabilities of the parties in a CIF
contract have been described by Lord Porter in
Comptoir d' Achat vs. Luis de Ridder; The Julia
[1949] A.C. 293
 Cond.

• It is clear that the right of the buyer to claim

policy amount would arise when he obtained
title to the property and he must produce the
documents of transfer. Here, the buyer was
not in possession of any such documents of
title.
• The consignee could not produce any
documents concerning their title to the goods
before M/s. W.K. Webster & Company and this
evidently shows that the title had not passed
to the consignee at London.
 Cond.

• The insurable interest over the goods continued

to be with the respondent. Under such
circumstances, the respondent is not entitled to
receive the payment in Pounds Sterling.
• And held that the respondent is entitled to get
Rs. 28,30,000 with interest @ 18% from the date
on which it preferred the claim petition before
the appellant, till payment. The respondent is
also entitled to receive Rs.20,000 towards costs
ordered by the National Commission.
 Kalyani Jethalal shah v. NIC
• Insurance for total and constructive loss only,
whether partial loss is payable?
• A ship was purchased by the complainant firm
for breaking. A marine hull policy was issued by
the opposite party Insurance company for
journey of the ship from Bombay Harbour to
Powder works Bunder Darukhana ship breaking
yard.
• The cover note mentioned the interest as
under:-
• “Interest insured Hull and Machinery trading
warranties total loss, constructive total loss,….
 Contd.

• While at ship breaking yard, the labourers employed

by the ship breakers had left the ship for lunch at the
time the fire broke out causing partial loss.
• The claim was repudiated by the insurer on several
grounds.
• The contention of the complainant was that the risk
covered under the policy included ‘any risk arising due
to fire’.
• The insurance company strongly denied the allegation
and alleged that the words “any risk arising due to
fire” was not in the original policy and that was the
result of the interpolations made by the insured.
 Contd.

• The commission was of the opinion that the

questionnaire filled by the complainant at the
time of insurance showed that the insurance
was for total loss and constructive loss, and
the loss caused by the fire had been
incorporated therein by the ‘including loss’.
• Thus total loss and constructive loss that may
be due to various causes including fire.
• The commission also found that the absence
of crew members on board the ship was in
clear violation of the insurance contract.
 Contd.

• The commission referred various definitions in marine

Insurance Act (Sections. 56, 57 and 61) and referred
case law
• Prince v. Maritime Insurance Co. Ltd.
• In this case ship along with its cargo was insured and
the policy was constructive total loss. After covering
some distance only partial loss took place.
• It was held that since the loss was only partial while the
insurance was for total loss, the action by the insured
must fail. Repelling the argument that it would be very
inconvenient that persons covering themselves by
insurance should not be entitled to recover because the
entire ship and cargo was not lost,
 Cond.
• Section-56. Partial and total loss.
• (1) A loss may be either total or partial. Any loss other than a
total loss, as hereinafter defined, is a partial loss.
• (2) A total loss may be either an actual total loss, or a
constructive total loss.
• (3) Unless a different intention appears from the terms of the
policy, an insurance against total loss includes a constructive, as
well as an actual, total loss.
• (4) Where the assured brings a suit for a total loss and the
evidence proves only a partial loss, he may, unless the policy
otherwise provides, recover for a partial loss.
• (5) Where goods reach their destination in specie, but by reason
of obliteration of marks, or otherwise, they are incapable of
identification, the loss, if any, is partial and not total.
 Contd.
• Section-57. Actual total loss.
• (1) Where the subject- matter 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 is an actual total loss.
• (2) In the case of an actual total loss no notice of
abandonment need be given.
• Section-61. Effect of constructive total loss. Where
there is a constructive total loss the assured may
either treat the loss as a partial loss, or abandon the
subject-matter insured to the insurer and treat the
loss as if it were an actual total loss.
 Contd.

• Thus, the commission observed that in the case in

hand also the insured could have covered him not only
for total loss but also for partial loss which they did
not.
• The commission also referred
• Continental Grain co. Inc. v. Twitchell
• Western Assurance co. of Toronto v. Poole
• On the basis of the various definitions and the
observations in the above referred cases, the
commission observed that the principle is that if a
policy of insurance is taken for total loss, or
constructive total loss, the insurance company will not
be liable to pay the partial loss.
 Contd.

• The partial loss has to be separately insured.

• The commission also referred to Section.56(4)
of the Marine insurance Act and observed that
this section enables the court to award
compensation even for the partial loss when
the claim is brought for total loss, unless there
are words in the insurance policy ruling out
the possibility.
• The commission referred to O’ May on Marine
Insurance, 1993 edn., which reads as under:
 Contd.

• “similarly, where the assured brings an action for a

total loss and the evidence proved only a partial
loss, Sec-56(4) of Marine Insurance Act 1906 states
that the ‘assured may recover for a partial loss’. If,
of course, the policy ‘otherwise provides’ as, for
instance, the cover is against ‘total loss only’, there
would be no alternative claim for partial loss”.
• In the instant case, the commission observed,
there was no insurance against partial loss and
what had taken place was partial loss. The claim
was also for partial loss only. Thus the complaint
by the company was dismissed.