Philippine Marine Insurance


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Presentation on Marine Insurance by law students from the Polytechnic University of the Philippines-College of Law, for Insurance Law under Commissioner Wilfredo Reyes.

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Philippine Marine Insurance

  1. 1. Facilitators: Lim, Christian Louie U.Zaragoza, Israel Jacob R.
  2. 2. 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.
  3. 3. 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.
  4. 4. 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
  5. 5. Perils of the sea vs Perils of theship 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.
  6. 6. Perils of the sea vs Perils of theship 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.
  7. 7. 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.
  8. 8. 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.
  9. 9. 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.
  10. 10. 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.
  11. 11. Implied Warranties seaworthiness of the ship. voyage and deviation carrying of required document of nationality or neutrality.
  12. 12. 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
  13. 13. 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.
  14. 14. 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 portion.
  15. 15. Can a ship, bound to an insured voyage, change its course so as to constitute a deviation?
  16. 16. Sub-Title 1-F THE VOYAGE AND DEVIATIONDeviation 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.
  17. 17. Is it necessary for a ship to be completely destroyed for the insured to be entitled to whole insurance?
  18. 18. Sub-Title 1-G LOSSSec. 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.
  19. 19. Will the insurer still be liable if the insured cargo be reshipped to another?
  20. 20. Sub-Title 1-G LOSSLiability 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)
  21. 21. Can a cargo owner claim from others if his cargo was sacrificed to save other cargoes?
  22. 22. Sub-Title 1-G LOSSGeneral 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.
  23. 23. Sub-Title 1-G LOSSRequisites 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.
  24. 24. Sub-Title 1-G LOSSLiabilities for GAC (Sec.136)Insurer’s:Amount of the insurance Proportion of x General Average = GAL for w/c the Total amount of the Loss (GAL) insurer is liable value involvedBenefited Owner1 :Amt of owner’s saved cargo Proportion of x General Average = GAL for w/c the Total amount of the Loss (GAL) owner1 is liable value involved
  25. 25. Sub-Title 1-G LOSSExample:A owns a vessel worth P8M insured against “absolute total lost only” with Y co. It became necessary to jettison B’s cargo worth P1M. As a result the vessel was saved, along with C’s and D’s cargo worth (P600,000) and P400,000 resp. How much is the liability of each? 8M 0.6MY: x(1M ) 800 ,000 C: x(1M ) 60,000 10 M 10 M 0.8M 1MD: x(1M ) 80,000 B: x(1M ) 100 ,000 10 M 10 M
  26. 26. Sub-Title 1-G LOSSLiabilities for GAC(Recall that) Insurer’s:Amount of the insurance General Proportion of x Average = GAL for w/c Total amount of the Loss (GAL) the insurer is value involved liableIf not insured for the whole value (Sec.164): Proportion ofAmount of the insurance general average Limit of liability x loss assessed = of insurer Value of the thing upon the thing insured insured
  27. 27. Sub-Title 1-G LOSSExample(previous problem):A owns a vessel worth P8M insured against “absolute total lost only” with Y co. It became necessary to jettison B’s cargo worth P1M. As a result the vessel was saved, along with C’s and D’s cargo worth (P600,000) and P400,000 resp. How much is the insurer Y co. liable if the vessel is insured for P4M only? 8MY is originally liable for: x(1M ) P800 ,000 10 MBut since the vessel is insured for P4M only, 4M x(800 ,000 ) P 200 ,000 8Mand the rest is to be bourn by the insured.
  28. 28. Can a cargo owner abandon his insured cargo to the insurer and ask him to pay for the whole insurance?
  29. 29. Sub-Title 1-H ABANDONMENTAbandonment 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 ¾ of its value as indicated in Section 139.
  30. 30. Sub-Title 1-H ABANDONMENTRequisites 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).
  31. 31. Sub-Title 1-I MEASURE OF INDEMNITYAmount of Recovery: (Partial) Loss Amount of x Amount of = Value of thing insured insurance recoveryProfits Separately insured: Value of property loss Amount of x Amount of = Value of the whole profit recovery property
  32. 32. Sub-Title 1-I MEASURE OF INDEMNITYExample:Goods valued at P500,000 insured for P400,000 incurred loss to the extent of P250,000. P200,000Amount of recovery x( P400,000) P160,000 P500,000Say in the above problem, the profits are separately insured at P100,000. P 200,000Amount of recovery x( P100,000) P 40,000 P500,000
  33. 33. Sub-Title 1-I MEASURE OF INDEMNITYInsured against Partial Loss:Market price in Market price in – sound state damaged state Amount of x Amount of = insurance recovery Market price in sound stateGoods 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 2M P1.2Amt of recovery x( P1M ) P 400,000 P 2M