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Marine Insurance Policies

Marine insurance policies are already noted, relate to four areas of risk, namely

  • The Hull – which is the vessel itself and her equipment
  • The Cargo – this refers to the goods carried by the vessel
  • Freight – this is the sum paid for transporting goods or for the hire of the ship
  • Building Risk – insures a vessel in the course of construction


All marine insurance policies, on either of these, come under the heading of one of the several types as indicated by the typed or written wording in the policy;


Time Policy – this insures the subject matter for a period of time

Voyage Policy –  insures the subject matter from one place to another, irrespective of the length of time

Mixed policy – covers both a voyage and period of time, say 60 days though the insured can seek an extension.

Construction policy – or the building risk, insures a vessel in course of building irrespective of the length of time taken.

Open Cover Policy – this is also called the floating policy and is a cargo policy expressed in general terms to cover a number of shipments to be declared.


Marine Insurance Policy

 Marine insurance policies are issued on agreed basis. This is provided for in Section 29(3) of the MIA which states that, “…. In absence of fraud, the value fixed by the policy is, as between the assurer, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial loss

 The value declared for the loss must be adequate.


Cargo Insurance

There is no standard form for marine cargo policy, except in few cases.


Marine Cover Notes

This is a temporary document evidencing that the insurance has been granted pending the issue of the policy. There is a contract of marine insurance from the time a Cover Note is issued.


The Standard Form of Marine Policy

The policy also called MAR Policy Form, is a simple document containing the same of the insurer and a clause binding the insurer to the performance of the contract. All information identifying the risk concerned and the amount insured is contained in the schedule of the policy. Such information includes;

  • Policy number
  • Place and date of issue
  • Name and address of the assured
  • Name of the carrying vessel
  • Description of voyage
  • Subject matter insured and description of packing
  • Type of insurance granted
  • The sum insured
  • The premium





Open policies (Open Covers)

An open policy is called a floating policy. It is a policy issued to a client with continuous dispatch of consignments and who therefore require insurance at frequent intervals

An open cover is issued, duly stamped, for an amount representing the insured’s estimated annual turnover in respect of consignments which may be declared as against the Open Cover Policy. The result is that sum insured will gradually diminish by amount of each declaration until the total sum insured is exhausted. A certificate is usually issued against each declaration. It shows the value in respect of each dispatch and the balance of the sum insured remaining under open cover.

The cover is issued for a period of one year or until the exhaustion of the amount insured whichever comes first. If the amount insured is about to be exhausted before the end of the the year, it can be increased by issuing an endorsement and charges appropriate extra premium.

Open covers are issued subject to the following conditions;

  • Type of the policy – this is the standard marine policy subject to applicable rates and clauses
  • Basis of valuation – invoice cost, the freight for which the insure dis liable, the cost of insurance plus 10 per cent
  • Inspection of the records – the insurer will have the right at the time during the business hours to inspect the insured records of dispatch made within the terms of the Open Cover.
  • Per Conveyance limit – it is a condition that the insured’s liability in respect to any one accident or series of accidents arising from the same event shall not exceed a specified sum at any one dispatch.
  • Location Limit – the insurers liability in respect to one accident or series of accidents from the same event in any one location shall not exceed the specified sum
  • Declaration – it is a condition of the policy that the assured is required to declare each and every dispatch coming under the scope of the policy within 24 hours or may be agreed and the declaration must be made in order to dispatch.


Institute Cargo Clauses

The policy must be adapted to the new marine policy form by the use of Institute clauses. This actual clause incorporated will depend on the need of the client and the subject matter of insurance being covered.


Institute Clauses

We shall be concerned with cargo clauses. The others beyond the scope of this study. There are three main sets of cargo clauses namely;

  • Institute Cargo Clause A
  • Institute Cargo Clause B
  • Institute Cargo Clause C

In each of the sets of clauses, the provisions are grouped under the following main headings.

  • Risks covered
  • Exclusions
  • Duration of cover
  • Claims
  • Benefits of insurance
  • Minimization of losses
  • Avoidance of delay
  • Law and practice

Other institute cargo clauses are;

  • Institute Cargo Clauses(Air) – excluding sending by post
  • Institute War Clauses(cargo)
  • Institute War Clauses (Air Cargo)
  • Institute Strikes Clauses (Cargo)
  • Institute Strikes Clauses (Air Cargo)


However, there are also some specialized clauses, these are based on either institute cargo clause A, B and C. Examples

  • Institute Bulky Oil Clauses – base on the ICC (C) but cover negligence of the master and contamination
  • Institute Coal Clauses – based on ICC(B) but cover spontaneous combustion
  • Institute Frozen Food Clauses – bases on ICC(A) but excludes variation in temperatures
  • Institute Frozen Meat Clauses.

 For purposes of underwriting of cargo business, it is necessary to be familiar with the coverages provided by these clauses. Therefore, the salient features of the principal cargo clauses will now be outlined. These are Institute Cargo Clauses A, B and C. the rest are constructed around these. The cover they provide is minimal in clauses C, increase at B and is Maximum at A


Institute Cargo Clause (C)

 The insurance under this Cargo Clause C provides a basic standard cargo cover against major casualties.  It covers loss or damage to the subject matter insured reasonably attributable to:

  • Fire or explosion
  • Vessel or craft being stranded, grounded, sunk or capsized
  • Overturning or derailment of land conveyance
  • Collision or contact of vessel, craft or conveyance with any external object other than water,
  • Discharge of cargo at the port of distress
  • General average and salvage charges incurred to avoid loss from any causes except those excluded
  • Jettison
  • Liability under ‘Both to Blame Collection” clause of contract of affreightment.


This effectively covers what are called perils of the sea, and is roughly equivalent to third party policy in motor insurance as it generally covers those perils that the cargo owner can claim from the vessel owner/operators


Institute Cargo Clause (B)

 This provides a wide form of cover than in Institute Cargo Clause C but less than clause A. It covers risks covered under the ICC C and also losses or damages reasonably attributed to:

  • Earthquake, volcanic eruption or lightning
  • Washing overboard
  • Entry of sea, lake or river water into a vessel, craft conveyance, container, lift van or place of storage
  • Total loss of any package lost overboard or dropped while loading onto or unloading from vessel or craft
  • General average and salvage charges incurred to avoid loss from any cause/s except those excluded.

Institute Cargo Clause (A)

 The cover provided here is for all risks of loss or damage to the subject matter insured except those specifically excluded. The risks must have occurred fortuitously. The clause extends to provide cover under general average and salvage charges incurred to avoid loss from any cause or causes except those excluded and liability under both to blame collision clause of the contract of affreightment.



General Exclusions Clause Under ICC (A, B and C)

All the three sets of clauses contain general exclusions. These are losses which insurance does not cover. they are provided by the clauses 4,5,6 and 7 of these clauses.

The more important one include loss of damage caused by;

  • Willful misconduct of the insured
  • Inherent vice or nature of the subject matter i.e. perishable goods like fruits and flowers
  • Ordinary leakage, loss in weight or vacuum or ordinary wear and tear
  • Delay, even though the delay was caused by an insured peril
  • Deliberate damage by the wrongful acts of any person. This is malicious damage and can be covered at additional premium under(B) and (C) clauses. Malicious damage is automatically covered under (A) clause
  • Insolvency or financial default of owner’s operators etc. of the vessel. Many ship owners, especially tramp vessel owners, fail to perform the voyage due to financial troubles with consequent losses or damage to the cargo. This is not an accidental damage. The insured has to be cautious in selecting the vessel of shipment.
  • Inadequate packing
  • Expenses arising from the use of any weapon of war employing atomic or nuclear fission and or fusion or like reaction or radioactive force or manner.
  • Strike, riot, lock outs, civil commotion and terrorism
  • War and kindred perils

Piracy is covered by the strikes clauses and not in the clauses C, B and A


Duration of Cover

The duration of cover is defined in the Transit Clause (popularly known as the Warehouse to Warehouse Clause of the ICC

 This provides for cover to commence from the time goods leave the warehouse at a place named in the policy and continuous during the ordinary course of the transit and terminates:

  • On delivery to the consignees’ or other final warehouse of destination named
  • On delivery to any immediate warehouse used by the insured for purposes of storage or distribution
  • On expiry of 60 days after discharge from the vessel at the final port of discharge whichever shall first occur.

The time limit of 60 days is indicated to ensure early clearance of goods by the consignee. Insurers extend the time limit at an additional premium in genuine circumstances causing delay in clearance.


Institute Cargo Clause (Air) excluding sending by post

The risks covered are ‘’ All Risks” and the exclusions are more or less the same under ICC (A) except general average and salvage charges. The duration of cover is the same as under ICC. (A) Except that the period of cover after unloading of cargo from the aircraft at the final place of discharge is limited to thirty days.


Institute War Clause Cargo

The war clauses provide cover for loss or damage to the subject matter insured caused by by;

  • War, civil war, revolution, rebellion, insurrection, civil strife arising from risks above and any hostile act by or against a belligerent power.
  • Capture, seizure, arrest, restraint, detainment, arising from risks above and the consequences thereof or any attempt threat.
  • Derelict, mines, torpedoes, bombs or other derelict weapons of war.


The peril of piracy is covered under (A) Clauses. The risks of capture, seizure, arrest, restraint, or detainment are only recoverable if arising from the risk of war, civil war etc. as indicated above, in addition, a General Average Clause Contains protecting against general average and salvage charges when incurred to avoid or in connection with the avoidance of loss from a risk covered under these clauses.


Institute Strikes Clauses(Cargo)

 These provides cover for for the risks from A, B and C Clauses excluded, by the Strike-exclusion Clause. The protection is against loss of or damage to the subject matter insured caused by; Strikes, locked – workers or persons taking part in labor disturbances, or riots or civil commotions and any terrorism or any person acting from political motive.

There is also cover for general average and salvage charges when incurred to avoid or in connection with the avoidance of loss from risk covered under the clauses. There is exclusion of loss or damage or expense arising from the absence, shortage or withholding or labor of ant description whatsoever resulting from any strike, lock out, labor disturbance, riot or civil commotion.


Hull Insurance

Ship owners resort to marine insurance for the protection of their ships, freight, disbursements and other interests against marine perils because heavy capital is involved. Hull insurance refers to the insurance of hull and her machinery and other interests. – known as subsidiary interests, of ocean going vessels, fishing vessels, sailing vessels, trawlers, and the like.

Subsidiary interest is generally freight and disbursements. The insurance of vessels while they are under construction is called construction or builders risks.

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