MARINE

INSURANCE
Facilitators:
Lim, Christian Louie U.
Zaragoza, Israel Jacob R.

Transportation Insurance
a very broad field of insurance which is

concerned with the perils of property in (or

incidental to) transit as opposed to property
perils at a general fixed location.
it does not include normal motor vehicle

insurance.
has two major divisions, namely:

(1) ocean
marine insurance; and (2) inland marine
insurance.

Ocean Marine Insurance

an insurance against risk connected with

navigation, to which a ship, cargo, freightage,

profits or other insurable interest in movable
property, may be exposed during a certain
voyage or a fixed period of time.
its scope includes: ships or hulls, goods or

cargoes, earnings and liabilities.

Inland Marine Insurance

covers primarily the land or over-the-land

transportation perils of property shipped by

railroads, motor trucks, airplanes, and other
means of transportation. It also covers risks
of lake, river, or other inland waterway
transportation and other waterborne perils
outside of those risks that fall definitely within
the ocean marine category

Perils of the sea vs Perils of the ship

perils of the sea refers to all kinds of marine

casualty resulting from the violent action of

the wind and waves while perils of the ship
are those resulting from the natural and
inevitable action of the sea.
perils of the sea covers the willful misconduct

of the ship master or crew while perils of the

ship covers only the mere negligence, failure,
or honest error of judgement of the same.

Perils of the sea vs Perils of the ship

most important difference:

perils of the sea

are those which are sought to be covered
under an ocean marine policy while perils of
the ship are not.

Insurable Interest
the owner of a ship has in all cases an

insurable interest in it.

even when it has been chartered to another

who agrees to pay him its value in case of loss.

the insurer, however, shall be liable only for
that part of the loss which the insured cannot
recover from the charterer.

the owner of a ship hypothecated by bottomry

has an insurable interest only on the excess of

its value over the amount secured by
bottomry.

Insurable Interest
the owner of a ship has an insurable interest

in expected freightage.
one having a reasonable expectation of profits

from a marine adventure has an insurable

interest over such profits.
the charterer of a ship has an insurable

interest to the extent that he is liable to be

damnified by its loss.

Concealment
the

failure to disclose any material fact or

circumstance which in fact or law is within the
knowledge of one party and of which the other has
no actual or presumptive knowledge.

information of the belief or expectation of a third

person, in reference to a material fact, is material.

a person insured is presumed to have knowledge of

a prior loss if the information might possibly have

reached him in the usual mode of communication.

Representations
should

pertain to a material fact (age,

equipment, earnings, and particular condition
of a vessel)
if intentional avoids the policy
if not intentional rescindable only from the

time the representation becomes false.

a falsity of a representation as to expectation,

in the absence of fraud, is not a ground for

rescission.

Implied Warranties
seaworthiness of the ship.
voyage and deviation
carrying of required document of nationality

or neutrality.

Seaworthiness
the vessel is reasonably fit to perform the

service, and to encounter the ordinary perils

of the voyage.
nature of the ship
nature of the voyage
nature of the service

Seaworthiness
general rule: it is complied with if the ship is

seaworthy at the time of the commencement

of the risk.
exception:

unreasonable delay on the part of

the master in repairing the defects during the
voyage.

Seaworthiness
in case of time policies the ship should be

seaworthy at the commencement of every

voyage it undertakes during that time.
in case of cargo policies each vessel upon

which the cargo is shipped or transhipped

must be seaworthy at the commence of each
particular voyage.
in case of voyage policies the ship must be

seaworthy at the commencement of each

Can a ship, bound to an insured voyage, change

its course so as to constitute a deviation?

Sub-Title 1-F
THE VOYAGE AND DEVIATION

Deviation is any unexcused departure from regular course

or route of insured voyage or any other act which
substantially alters the risk.
Sec. 124. A deviation is proper:
(a) When caused by circumstances over which neither the
master nor the owner of the ship has any control;
(b) When necessary to comply with a warranty, or to avoid a
peril, whether or not the peril is insured against;
(c) When made in good faith, and upon reasonable grounds
of belief in its necessity to avoid a peril; or
(d) When made in good faith, for the purpose of saving
human life or relieving another vessel in distress.
Improper Deviation:
Sec. 125. Every deviation not specified in the last section is
improper.

Is it necessary for a ship to be completely

destroyed for the insured to be entitled to
whole insurance?

Sub-Title 1-G
LOSS

Sec. 127. A loss may be either total or partial.

Sec. 129. A total loss may be either actual or
constructive.
Actual Total Loss exist when the subject
matter of the insurance is wholly destroyed or
lost or when it is so damaged as no longer to
exist in its original character.
Constructive Total Loss (or technical total
loss) is one which the loss, although not
actually total, is of such character that the
insured is entitled, if he thinks fit, to treat it as
total by abandonment.

Will the insurer still be liable if the insured cargo

be reshipped to another?

Sub-Title 1-G
LOSS

Liability in case of Reshipment:

Sec. 133. When a ship is prevented, at an
intermediate port, from completing the
voyage, by the perils insured against, the
liability of the marine insurer on the cargo
continues after they are thus reshipped.
Note: Liability here includes damages, expense
of discharging, storage, reshipment, extra
freightage and all other expenses incurred in
saving the cargo reshipped. (Sec.134)

Can a cargo owner claim from others if his

cargo was sacrificed to save other cargoes?

Sub-Title 1-G
LOSS

General Averages:
Include damages and expenses which are
deliberately caused by the master of the vessel
in order to save the vessel, her cargo or both for
real and known risk.
Principle of General Average Contribution
(GAC):
The owners of the other interests benefited by a
sacrifice must contribute proportionately to the
loss incurred.
Example: Case of jettison.

Sub-Title 1-G
LOSS

Requisites to the right to claim GAC:

(1) common danger;
(2) deliberate sacrifice;
(3) done for common safety;
(4) made by the master;
(5) not caused by fault of the one asking for
GAC;
(6) successful; and
(7) necessary.

Sub-Title 1-G
LOSS

Liabilities for GAC (Sec.136)

Insurers:
Amount of the
insurance
Total amount of
the
value involved

General
Average
Loss (GAL)

Proportion of
GAL for w/c
the insurer is
liable

Benefited Owner1 :
Amt of owners saved
cargo
Total amount of
the
value involved

General
Average
Loss (GAL)

Proportion of
GAL for w/c
the owner1 is
liable

Sub-Title 1-G
LOSS

Example:
A owns a vessel worth P8M insured against
absolute total lost only with Y co. It became
necessary to jettison Bs cargo worth P1M. As
a result the vessel was saved, along with Cs
and Ds cargo worth (P600,000) and P400,000
resp. How much is the liability of each?
8M
x(1M ) 800,000
10 M

0.6 M
x(1M ) 60,000
C:
10 M

0.8M
x(1M ) 80,000
D:
10 M

1M
x(1M ) 100,000
B:
10 M

Y:

Sub-Title 1-G
LOSS

Liabilities for GAC

(Recall that) Insurers:
Amount of the insurance
Total amount of the
value involved

General
Average
Loss (GAL)

Proportion
of GAL for
w/c the
insurer is
liable

If not insured for the whole value (Sec.164):

Amount of the
insurance
Value of the
thing insured

Proportion of
general
average loss
assessed
upon the
thing insured

Limit of
liability of
insurer

Sub-Title 1-G
LOSS

Example(previous problem):
A owns a vessel worth P8M insured against absolute
total lost only with Y co. It became necessary to
jettison Bs cargo worth P1M. As a result the vessel
was saved, along with Cs and Ds cargo worth
(P600,000) and P400,000 resp. How much is the
insurer Y co. liable if the vessel is insured for P4M
only?
8M
x(1M ) P800,000
Y is originally liable for:
10 M
But since the vessel is insured for P4M only,
4M
x(800,000) P 200,000
8M

and the rest is to be bourn by the insured.

Can a cargo owner abandon his insured cargo to the

insurer and ask him to pay for the whole
insurance?

Sub-Title 1-H
ABANDONMENT

Abandonment is an act of an insured in notifying

the insurer that owing to the damage done to
the subject of the insurance, he elects to take
the amount of the insurance in the place of the
subject thereof, the remnant of which he
cedes to the insurer.
Note: In the Philippines, the insured may not
abandon the thing insured unless the loss or
damage is more than of its value as
indicated in Section 139.

Sub-Title 1-H
ABANDONMENT

Requisites for Valid Abandonment:

(1) actual relinquishment(Sec. 138);
(2) constructive total lost(Sec. 139);
(3) total and absolute(Sec. 140);
(4) reasonable time(Sec. 141);
(5) factual(Sec. 142);
(6) oral or written notice(Sec. 143); and
(7) explicit and specific as to the cause(Sec.
144).

Sub-Title 1-I
MEASURE OF INDEMNITY

Amount of Recovery:
(Partial) Loss
Value of thing
insured

Amount of
insurance

Amount of
recovery

Profits Separately insured:

Value of property loss
Value of the whole
property

Amount of
profit

Amount of
recovery

Sub-Title 1-I
MEASURE OF INDEMNITY

Example:
Goods valued at P500,000 insured for P400,000
incurred loss to the extent of P250,000.
P 200,000
Amount of recovery

x( P 400,000) P160,000
P500,000

Say in the above problem, the profits are

separately insured at P100,000.
P 200,000
Amount of recovery

x( P100,000) P 40,000
P500,000

Sub-Title 1-I
MEASURE OF INDEMNITY

Insured against Partial Loss:

Market price in
Market price in

sound state
damaged
state
Market price in sound
state

Amount
of
insuranc
e

= Amount of
recovery

Goods valued at P1.5M was insured for P1M. At the

destination the market price is only P1.2M due to
partial damage incurred instead of P2M if in sound
state.
P 2 M P1.2

x( P1M ) P 400,000
P 2M
Amt of recovery