marine losses and insurance

1. Capt. Amin Al Qawasmeh
Jordan Academy for maritime studies

2. Overview
Introduction
classification of marine losses
7/4/2022 PRESENTATION TITLE 2

3. Types of Marine Losses
If the loss takes place on account of any of the perils insured against
with the insurer, the insurer will be liable for it and shall have to make
good the losses to the assured. If the peril is insured, the insurer will
indemnify the assured, otherwise not.
7/4/2022 Marine Losses 3

5. Total loss
7/4/2022 Marine losses 5
Total loss
There is an actual total loss 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.
Losses are deemed to be total or complete when the subject- matter is fully
destroyed or lost or ceases to be a thing of its kind.
It should be distinguished from a partial loss where only part of the property
insured is lost or destroyed.
In case of a total loss, the insured stands to lose to the extent of the value
of the property provided the policy amount was to that limit.

6. 1- Actual total loss
7/4/2022 Marine Losses 6
Actual total loss
The actual total loss is a material and physical loss of the subject-matter insured.
Where the subject-matter insured is destroyed or so damaged as to cease to be a thing of the kind
insured, or where the insured is irretrievably deprived thereof, there is an actual total loss.
When a vessel is foundered or when merchandise is so damaged as to be valueless or when the
ship is missing, it will be an actual total loss

7. 7/4/2022 PRESENTATION TITLE 7
The actual total loss occurs in the following cases:
1.The subject matter is destroyed, e.g., a ship is entirely destroyed by fire.
2.The subject matter is so damaged as to cease to be a thing of the kind insured. Here, the
subject- matter is not totally destroyed but damaged to such an extent as the result of the
mishap; it is no longer of the same species as originally insured. Examples of such losses
are—foodstuff badly damaged by seawater became unfit for human consumption, and hides
became valueless as hides due to the admission of water. These damaged foodstuffs or hides
may be used as manure. Since the characters of the subject matters are changed and have
lost their shapes, they are all actual total loss.
3.The insured is irretrievably deprived of the ownership of goods even if they are in physical
existence as in the case of capture by the enemy, stealth by a thief, or fraudulent disposal by
the captain or crew.
4.The subject matter is lost. For example, where a ship is missing for a very long time and no
news of her is received after the lapse of a reasonable time. An actual total loss is presumed
unless there is some other proof to show against it.

8. 2-Constructive total loss
7/4/2022 Marine Losses 8
The subject matter is not lost in the above manner but is reasonably abandoned
when its actual total joss is unavoidable or when it cannot be preserved from total
loss without involving expenditure that would exceed the value of the subject matter.
For example,
The cost of repair and replacement was estimated to be $50,000, whereas the ship
was estimated to be $40,000, the ship may be abandoned and will be taken as a
constructive total loss.
But if the value of the ship were more than $50,000, it would not be a constructive
total loss. Here it is assumed that retention of the subject matter would involve
financial loss to the insured.

9. The constructive total loss will
be where
7/4/2022 PRESENTATION TITLE 9
The constructive total loss will be where;
1.The subject-matter insured is reasonably abandoned on account of its actual
total loss appearing to be unavoidable;
2.The subject matter could not be preserved from actual total loss without an
expenditure that would exceed its repaired and recovered value.
The insured is not compelled to abandon his interest; the insurer will have to
pay the full insured value where the goods are abandoned.
Where awe 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 was an actual total loss.

10. Difference between actual and
constructive total loss
7/4/2022 Marine Losses 10
The substantial total loss is related to physical impossibility, and the constructive total loss is related
to commercial impossibility.
For example,
If the hides are so damaged that it is impossible to prevent the hides from destruction, and they may
become a mass of putrefied matter, the case is of an actual total loss.
But suppose it was possible to restore the hides to their original condition, though the cost of so
doing would exceed their value at the destination. In that case, the damaged hides can be claimed
as a constructive total loss because the completion of the adventure has become commercially
impossible.

11. Presumed Total Loss
7/4/2022 Marine Losses 11
When the ship concerned in the adventure is missing her total loss may, after the
lapse of a reasonable time, be presumed. Ordinarily, it will be presumed that the
loss arose from "peril the sea" which is an ordinary marine risk. But if the ship was
last known to have been. In war-infested areas then, in the absence of other
evidence, the presumption will be that she was lost through war risk

12. Partial losses
7/4/2022 Marine Losses 12
Rules York Antwerp
Partial average
General average loss

13. 7/4/2022 PRESENTATION TITLE 13
The York-Antwerp Rules
An International conference in York 1864.
→ York Rules
Revised in Antwerp 1877.
→ First set of York-Antwerp rules
The York Antwerp Rules were updated in 1994, 2004, and 2016.
The text of the 1994 Rules, those still in widest use
They don’t have the status of an international convention

14. 7/4/2022 PRESENTATION TITLE 14

15. Rule A of the York-Antwerp
Rules defines a general average
act
7/4/2022 York Antwerp 15
York Antwerp rules have two sections,
The first section identifies the letter A to G these letters act as a guideline on
what the GA included
The second section has a rule that identifies by number rule 1, rule 2 these
rules give specific situation sacrifice and expenditure that can be included

16. PARTICULAR AVERAGE LOSS
7/4/2022 Marine losses 16
The particular average loss is ‘a partial loss’ of the subject-matter insured caused by a peril
insured and is not a general average loss.
The general average loss or expense is voluntarily made for the standard safety of all the parties
insured.
But, the particular average loss is fortuitous or accidental, and it cannot be partially shifted to
others but will be borne by the persons directly affected. The particular average loss must fulfill
the following conditions:
1) The particular average loss is a partial loss or damage to any particular interest caused to
(hat interest only by a peril insured against.
2) The loss should be accidental and not intentional.
3) The loss should be of the particular subject matter only.
4) It should be the loss of a part of the subject matter or damage to that or both.

17. 7/4/2022 Marine Losses 17
The distinguishing feature in this matter is that the properties insured are all of the same
description, kind, and quality. They are valued as a whole in the policy; the total loss of a
part of this whole is a particular loss, but where the properties insured are not all of the
same description, kind, and quality. They are separately valued in the policy, the loss of an
apportionable part of the interest is a total loss.
In case of total loss of a part of recoverable either as a total loss or as a particular average
loss, the basis of the settlement will be on the total loss of the whole lot or the insurer will be
liable to pay in proportion according to the insured or insurable value of the whole interest.

18. 7/4/2022 Marine Losses 18
The law of general average is a principle of maritime law whereby all stakeholders in a sea venture
proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the
whole in an emergency.
The rules on general average are founded on the common venture of the ship, cargo, and freight during a
voyage. Their purpose venture of the commonality is exposed to a common danger during the voyage – for
instance, the ship springs a leak and is in danger of sinking- then the extraordinary sacrifices and
expenditures resulting from rescue efforts shall be divided among the community in relation to the value of
each respective interest in this form.

19. 7/4/2022 Marine Losses 19
From the simple core- which is generally referred to as the principle of common safety-
the rules of general average expenses may include extraordinary expenses incurred for
the benefit of the venture, even where this was not strictly necessary to avoid a common
danger.

20. When the General Average Loss can
arise?
7/4/2022 Marine Losses 20
As per (A) of York- Antwerp Rules GA is defined as follows: "there is a general average act when,
and only when, any extraordinary sacrifice or expenditure is international and reasonably made
incurred for the common safety the purpose of preserving from peril the property involved in a
common maritime adventure"

21. 7/4/2022 Marine losses 21
It is important to bear in mind that before any question
of general average can arise:
1. The sacrifice or expenditure must be of an extraordinary nature. Damage to a
ship, her machinery, or equipment whilst being used for the purpose for which
they are indented would not amount to general average. On the other hand,
using a ship's engines in an effort to refloat when stranded would, if the
engines were damaged as a result, is an extraordinary sacrifice.
2. There must be a common adventure. That is to say, the ship, freight and cargo
must all be involved. In any case, there must be more than one interest.
3. The common adventure must be in peril. That is, all interests must be imperiled.
4. There must be a sacrifice (of property) or an expenditure (of money).
5. The sacrifice or expenditure must be made or incurred reasonably and
intentionally for the sole purpose of preserving the adventure from the
immediate peril.

22. 7/4/2022 Marine Losses 22
GA acts include such things as:
1. Putting into a port of refuge to effect necessary repairs.
2. Voluntary stranding to avoid sinking
3. Working of ship’s engines when a ship is ashore in a position of peril.
4. The jettison of cargo to float a grounded ship or to prevent the ship from capsizing.
5. Extinguishing fire on board ship.
6. Expenses for salvage remuneration.
Damage to machinery and boilers including expenses in connection with bringing afloat a ground ship

23. 7/4/2022 Marine Losses 23
5-Even expenses that were not necessary to bring the ship and cargo out of danger will
be compensated. These expenses could, for example, include expenses for unloading
handling storage, and reloading cargo while the ship is repaired, or wages incurred
during the ship's stay in a port of refuge. The reason for the admission of such expenses
in general average is that they have been incurred for the advantage of the ship, cargo,
and freight- they make the continuation and completion of the voyage possible.

24. Piracy –
Does it give rise to a claim
for General Average?
7/4/2022 General Average 24

25. Thank you
Capt. Amin Al Qawasmeh