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

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

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. 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. 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. 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.

6. 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.

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

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. 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. 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. Can a ship, bound to an insured voyage, change its
course so as to constitute a deviation?

16. 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.

17. Is it necessary for a ship to be completely destroyed for
the insured to be entitled to whole insurance?

18. 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.

19. Will the insurer still be liable if the insured cargo be
reshipped to another?

20. 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)

21. Can a cargo owner claim from others if his cargo was
sacrificed to save other cargoes?

22. 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.

23. 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.

24. Sub-Title 1-G
LOSS
Liabilities 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 involved
Benefited 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. 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 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 0.6M
Y: x(1M ) 800 ,000 C: x(1M ) 60,000
10 M 10 M
0.8M 1M
D: x(1M ) 80,000 B: x(1M ) 100 ,000
10 M 10 M

26. Sub-Title 1-G
LOSS
Liabilities 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 liable
If not insured for the whole value (Sec.164):
Proportion of
Amount of the insurance general average Limit of liability
x loss assessed = of insurer
Value of the thing upon the thing
insured insured

27. 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 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?
8M
Y is originally liable for: x(1M ) P800 ,000
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.

28. Can a cargo owner abandon his insured cargo to the
insurer and ask him to pay for the whole insurance?

29. 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 ¾
of its value as indicated in Section 139.

30. 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).

31. Sub-Title 1-I
MEASURE OF INDEMNITY
Amount of Recovery:
(Partial) Loss Amount of
x Amount of =
Value of thing insured insurance recovery
Profits Separately insured:
Value of property loss Amount of
x Amount of =
Value of the whole profit recovery
property

32. 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.
P200,000
Amount of recovery x( P400,000) 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

33. Sub-Title 1-I
MEASURE OF INDEMNITY
Insured against Partial Loss:
Market price in Market price in
–
sound state damaged state Amount of
x Amount of =
insurance recovery
Market price in sound state
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 2M P1.2
Amt of recovery x( P1M ) P 400,000
P 2M