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THE
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SEAWORTHINESS IN MARINE INSURANCE
By Adv. Sujata Kumari Muni &
Adv. Sanjeeb Panigrahi
Supreme Court of India.
“Shipping in the 21st century underpins international
commerce and the world economy as the most efficient, safe
and environmentally friendly method of transporting goods
around the globe. We live in a global society which is supported
by a global economy – and that economy simply could not
function if it were not for ships and the shipping industry”1
INTRODUCTION
According to Tetley, seaworthiness may be defined as “the state
of the vessel in such a condition, with such equipment, and manned by
such a master and crew, that normally the cargo will be loaded, carried,
cared for and discharged properly and safely on the contemplated
voyage.”
According to Section 41(4) of The Marine Insurance Act, 1963, a
ship is deemed to be seaworthy when she is reasonably fit in all respects
to encounter the ordinary perils of the sea of the adventure insured.
Seaworthiness is an important concept in Maritime Law, the effect of
the term is not confined to one area of the shipping industry— it affects
Marine, Marine Insurance, Marine Pollution, Carriage of Goods by Sea,
Liability, etc. As a result, these issues are dealt under different areas of
law, and it has been covered by both national laws and international
conventions.
1 International Maritime Organization, International Shipping, Carrier of
World Trade; https://business.un.org/en/entities/13
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Vessel seaworthiness is not limited to the physical fitness of the vessel
itself, but it further extends to cover the vessel’s equipment, competency
of the seamen, documentation and all other issues that might affect the
fitness of the vessel and its efficiency to encounter the ordinary perils of
the sea. Consequently, this kind of seaworthiness is divided into physical
seaworthiness, human seaworthiness and documentary seaworthiness.
The physical seaworthiness2
of the vessel deals with the state of the
vesselitself, i.e. it’s readiness toencounterthe ordinary perils of the sea that
it might face during its voyage, taking into consideration the type of the
vessel, its age, the type of navigational water, the route it is going to
take, and the time of the year at which it is going to embark on the journey.
The human seaworthiness of the vessel involves human errors
causing marine accidents. A report commissioned by the Marine
Directorate of the Department of Transport entitled “The Human
Element in Shipping Casualties” found that the human element was
present in a large proportion of Marine Casualties: it was present in 90 per
cent of collisions and groundings, and in more than 75 per cent of contacts
and fire/explosions. Even though the ship is physically seaworthy, it
may not have a competent crew with special knowledge regarding the
vessel, and this could increase the possibility of its being involved in an
accident that could lead to damage or loss of the cargo, human casualties
or loss of property. Hence, the vessel should be provided with a
competent crew and other necessary physical assets by the carrier.
Documentary seaworthiness signifies that the carrier is required to
have onboard certain documents to ensure its safe sailing and to comply
with both national and international rules, regulations and other
regulatory norms. The documents include navigational documents
necessary for safe navigation, ship’s plans which are important to show
how the ship’s parts can be dealt with and operated without
compromising the safety of the vessel, her crew and cargo. The
documents which are important for the vessel to be able to load, unload
or sail to its destination should also be accompanied. Such documents
are very important to enable the vessel to enter or leave ports and might
include ISM or ISPS documentation. It is imperative that the documents
are kept up-to-date.
THEORETICAL FRAMEWORK
The doctrine of seaworthiness in Maritime Law has been developed to
protect the different interests exposed to the perils of the marine
adventure. The jurisprudence of seaworthiness developed by American
2 The Madeleine [1967] 2 Lloyd’s Rep 224
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Courts in 1789 harping on a contract theory. Under such contractual
obligations, recovery was sought for wages under the contract of
employment rather than for physical injury. In the late nineteenth
century, the judicial trend was to examine both contractual duties of
seaworthiness and the emerging common-law tort duties of the employer
to provide a safe place to work. The tort damages were recovered for
injuries caused by unsafe and unfit conditions on board ship by the
maritime workers. Later the federal judiciary expanded seaworthiness
beyond the confines of common-law employer’s liability.
Until the nineteenth century, Maritime Law was governed by the
national laws of different countries, e.g. the Common law in the UK and
US Harter Act etc. However, because of the international nature of the
Carriage of Goods by Sea there was a need to unify the rules governing
maritime activities in general, and carriage of goods by Sea in particular,
in order to ensure that the parties to any maritime activity are aware of
the result of the breach of agreements by either party. This resulted in
the introduction of different maritime conventions to govern different
aspects of maritime transactions, e.g. liability, pollution, carriage of
goods, safety and security, collision, Maritime Liens and Mortgage etc.
The first convention on seaworthiness in the context of Marine
insurance was the Unification of Certain Rules of Law relating to Bills
of Lading, Brussels, 1924 (The Hague Rules)3
and this convention was
the first International instrument to change the nature of the carrier’s
obligation to provide a seaworthy vessel. The nature of duty also
underwent certain changes like the absolute duty of exercising due
diligence to make the vessel seaworthy. The convention also provided
detailed articles to deal with the issue of seaworthiness and basis of
liability of the carrier. However, this convention was amended by Visby
Amendments in 19684
which is now holding the field as it is widely
accepted and most applicable rules in the Carriage of Goods by sea route.
This convention was also followed by the United Nations Convention
on the Carriage of Goods by Sea (Hamburg Rules) in 19785
, though it
came into force in 19926
. The convention differed, with respect to
seaworthiness, in many ways like (i) it did not deal with seaworthiness
in a separate detailed article, (ii) The duty of the carriers to exercise due
diligence was extended to the whole period when the carriers have
custody of the cargo, (iii) It made the carrier responsible for the loss of
3 http://www.admiraltylawguide.com/conven/haguerules1924.html
4 https://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/
portrait.pdf
5 http://www.admiraltylawguide.com/conven/hamburgrules1978.html
6 http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/
Hamburg_rules.html
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or damage to the cargo unless he was able to prove his innocence. (iv)
Finally, it did not provide the carrier with a list of exceptions to limit his
liability. These differences and maybe some other reasons why many
countries did not sign this convention for so long. There are about 34
countries which have signed and ratified this convention7
.
Another Convention which has on important impact on the issue
of Seaworthiness is the International Convention on Safety of Life at Sea
(SOLAS) 1974, especially Chapter IX which adopted the International
Safety Management Code (ISM) and came into force in two stages i.e.
in July 1998 and July 2002, and Chapter XI which incorporates the
International Ship and Port Facility Security (ISPS) Code which came
into force in July 2005. These two Codes guide the safety and security
aspects of the shipping industry and impose certain obligations on
shipping companies to comply with their requirements8
.
Finally, the shipping industry, like any other industry, is always on the
move and developing to meet the needs of the trade, therefore, the laws
governing it should be updated or changed to meet the changes in the
industry. It is for this purpose, the Committee Maritime International
(CMI) and the United Nation Commission on International Trade Law
(UNCITRAL) worked together on new Draft Instrument on Transport
Law. This Instrument affects the carrier’s obligation of seaworthiness in
different ways that is, (i) the time at which the Carrier should exercise
his duty, (ii) the Carrier’s basis of liability and burden of proof, (ii) the
protections the carrier has to limit his liability. The United Nations
Commission on International Trade Law(UNCITRAL) and its Working
Group III (Transport Law) prepared the United Nations Convention on
Contracts for the International Carriage of Goods Wholly or Partly by
Sea (“The Rotterdam Rules”) from 2002 to 2008 (the ninth to the twenty-
first sessions of Working Group III and the forty-first session of
UNCITRAL)9
. On December 11, 2008, during its 63rd
session, the UN
General Assembly adopted the Rotterdam Rules. The Rotterdam Rules
opened for signing in September 2009. Since then, 25 countries have
signed and three countries have ratified the convention. The main
objective of this rule was to ensure global uniformity in maritime rules
i.e. to provide a new regime that is intended to replace all of the other
rules currently in place10
.
7 http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/
Hamburg_status.html
8 http://www.imo.org/en/about/conventions/listofconventions/pages/
international-convention-for-the-safety-of-life-at-sea-(solas),-1974.aspx
9 http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/
Compilation_of_Reports.pdf
10 https://www.shippingsolutions.com/blog/the-rotterdam-rules
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THE CURRENT LEGAL FRAMEWORK OF SEAWORTHINESS
Seaworthiness is a concept that runs through maritime law in at least
four contractual relationships. In a marine insurance voyage policy, the
assured warrants that the vessel is seaworthy. A carrier of goods by sea
owes a duty to a shipperof cargo that the vessel is seaworthy at the start of
the voyage. A shipowner warrants to a charterer that the vessel under the
charter is seaworthy; and similarly, a shipbuilder warrants that the vessel
under construction will be seaworthy11
.
The growth of the maritime sector in India over the past decades
has been quite phenomenal. The importance of the shipping industry in
India and on the international commerce can be evidenced from the fact
that 90% of the world trade is carried by sea. Maritime law in India is an
interesting branch of law which includes, ship financing, maritime liens,
carriage of goods by sea; marine insurance; laws of ownership and
registration of ships; ship sale and building contracts, limitation of
liability, ship mortgages; manning of ships; the law of collisions, salvage,
towage and pilotage; claims and priority of the same; the law of marine
pollution, as well as the Customs and Port laws. All these aspects are
governed by a number of legislation in India, most of them are pre-
independence legislation on the subjects though many have been
amended from time to time to make it more relevant.
Most of the current maritime laws in India has yoked from its
colonial past, namely, the Admiralty Offences (Colonial) Act, 1849, the
Inland Steam vessels Act, 1917; the Coasting Vessels Act, 1838; the Indian
Registration of Ships Act, 1841; the Indian Registration of Ships Act (1841)
Amendment Act, 1850; the Indian Ports Act, 1908; the Indian Merchant
Shipping Act, 1923; the Merchant Seamen (Litigation) Act, 1946; the
Control of Shipping Act, 1947; the Merchant Shipping Laws (Extension
to Acceding States and Amendment) Act, 1949, the Territorial Waters
Jurisdiction Act, 1878, etc. In addition to the above, a series of legislative
efforts of British Parliament, promulgated between 1823 and 1940,
governed various aspects of Indian shipping, including ship-owners’
liability, salvage, certification of seafarers, safety and load line
conventions. For determination of disputes, the admiralty jurisdiction
of Indian Courts began with Letters Patent, 1862 which vested the High
Courts of Judicature at Madras, Bombay and Fort William in Bengal
with jurisdiction for trial and adjudication of maritime-related disputes
arising in India, which was however, confirmed by the Colonial Courts
of Admiralty (India) Act, 189112
. By the Colonial Courts of Admiralty
11 https://en.wikipedia.org/wiki/Seaworthiness_(law)
12 Clause 32, the Letters Patent, 1862; explicitly declared the High Courts of
Judicature at Madras, Bombay and Fort William in Bengal as Courts of
Admiralty or of Vice Admiralty.
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Act, 1890, the provisions of the Admiralty Court Act, 1840, and the
Admiralty Court Act, 1861, were governing the Courts in British India,
as they were Courts of law in British possession13
. After independence,
the jurisdiction of Admiralty Courts in India was still restricted to the
claims as enumerated in the aforestated British legislations, but in 1992,
the Supreme Court of India in M. V. Elisabeth14
categorically held that
High Courts in India are superior Courts of records with unlimited
jurisdiction with inherent and plenary powers to decide on their own
jurisdiction to redress grievances according to what is perceived to be
principles of justice, equity and good conscience where statute is silent
and judicial intervention is required. Accordingly, the Apex Court has
made the principles of International Convention on Maritime Laws
applicable in India’s common law instead of the age old British
legislation.
The Government of India in 2005 circulated a draft bill for an Admiralty
Act, 2005, seeking to repeal all of the aforementioned obsolete legislations
and in their place, to bring into existence a comprehensive law to regulate
the claims, jurisdiction, procedure, etc., in Admiralty in India15
.
It is pertinent to point out that, in addition to the above legislation, there
are several other legislation applicable in India which directly or
indirectly relate to maritime law, they are, the Indian Merchant Shipping
Act, 1958; the Indian Carriage of Goods by Sea Act, 1925; the Indian Bills
of Lading Act, 1856; the Multimodal Transportation of Goods Act, 1993; the
Major Port Trusts Act, 196316
; the MarineInsurance Act, 1963; the Contract
Act, 1872; the Sale of Goods Act, 1930; the Evidence Act, 1872; the Indian
Penal Code, 1860; the Transfer of Property Act, 1882; the Civil Procedure
Code, 1908; the Criminal Procedure Code, 1973; the Limitation Act, 1963;
the Companies Act, 1956; the Arbitration and Conciliation Act, 1996;
the Maritime Zones of India (Regulation of Fishery by Foreign Vessels)
Act, 1981; the Safety of Maritime Navigation and Fixed Platform on
Continental Shelf Act, 2002; the Territorial Waters Continental Shelf –
Exclusive Economic Zone and Other Maritime Zones Act, 1976, etc.
13 By S.22 of the Supreme Court of Judicature (Consolidation) Act, 1925, the
questions or claims in relation to which the High Courts had admiralty
jurisdiction, were listed out, and those were the claims for which a claimant
could approach the Admiralty Courts in India for reliefs.
14 M. V. Elisabeth v. Harwan Investment and Trading Pvt. Ltd., AIR 1993 SC
1014 : (1993) Supp. 2 SCC 433
15 "Admiralty Bill, 2005", http://www.prsindia.org/billtrack/the-admiralty-
bill-2005-160/, [accessed on 14th January 2013].
16 The Major Port Trusts Act, 1963 deals with the administration of the ports
and the jurisdiction over ships in ports.
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Seaworthiness is a concept that runs through maritime law is borne out
of contractual relationships. In a marine insurance voyage policy, the
objective of the insurance cover is to ensure that there is an assured
warranty that the vessel is seaworthy. Since the issue pertains to
transactions beyond geographical boundaries of the countries, a slew of
international conventions are in place to smoothen the shipping
transactions. A Convention that has a significant impact on the issue of
Seaworthiness is the International Convention on Safety of Life at Sea
(SOLAS) 1974, especially Chapter IX which adopted the International
Safety Management Code (ISM) and came into force in two stages July
1998 and July 2002, and Chapter XI which incorporates the International
Ship and Port Facility Security Code (ISPS) Code which came into force
in July 2005. These two Codes affect the safety and security aspects of
the shipping industry and impose certain obligations on shipping
companies to comply with their requirements.
Under the Indian law on Seaworthiness, the marine insurance cover
mainly governed by Indian Marine Insurance Act, 1963. Section 41 of
the Act deals with the Warranty of seaworthiness of ship —”(1) In a
voyage policy there is an implied warranty that at the commencement
of the voyage the ship shall be seaworthy for the purpose of the particular
adventure insured. (2) Where the policy attaches while the ship is in
port, there is also an implied warranty that she shall, at the
commencement of the risk, be reasonably fit to encounter the ordinary
perils of the port. (3) Where the policy relates to a voyage which is
performed in different stages, during which the ship requires different
kinds of or further preparation or equipment, there is an implied
warranty that at the commencement of each stage the ship is seaworthy
in respect of such preparation or equipment for the purposes of that
stage. (4) A ship is deemed to be seaworthy when she is reasonably fit
in all respects to encounter the ordinary perils of the seas of the adventure
insured. (5) In a time policy there is no implied warranty that the ship
shall be seaworthy at any stage of the adventure, but where, with
the privity of the assured, the ship is sent to sea in an unseaworthy
state, the insurer is not liable for any loss attributable to
seaworthiness.”
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Apart from these legislations, there are judgements of various courts in
India, which has laid down general principles of maritime law as is
recognised and practised in India. The seaworthy condition of the vessel
has a direct impact on the right of the carrier/ship-owner to claim
compensation from his insurers in case of loss or damage to the ship or
its cargo. While issuing an insurance policy for a vessel, the insurer(s)
will assume, while estimating the premium, that the vessel is deemed
to be seaworthy at the Commencement of the voyage. Under the
Insurance Act, the assured is under a legal obligation to disclose all
material information and circumstances known to him or else his
insurance contract can be void. Whenever the insurance policy does not
mention specifically about the seaworthiness of the vessel, the courts
generally interpret the intention of the contract against the insurer. The
courts presume that the issues with respect to classification is known to
the insurer and he cannot deny liability as he was aware of the risk
associated. In the case of marine insurance contract, the ship-owner
or cargo owner likely to sign the insurance contract made by the insurer
therefore if the insurer made any ambiguity relating to the
seaworthiness issues, he will not be allowed to gain from the ambiguity
he created. However, in order to avoid delays and unnecessary
litigation cost it is better the assured get the terms clarified before taking
the policy.
JUDICIAL RESPONSE TO THE CASES OF BREACH OF
WARRANTY IN SEAWORTHINESS
The questions of what duties a shipper is to perform with regards to the
seaworthiness of a ship is tied to the question of allocation of risks and
liabilities of damage which comes to the shoulder of the insurance
company whenever there is any force majeure event during the voyage.
The common law rules and the Hague-Visby rules provide different
standards with respect to seaworthiness of the vessel. The common
law rules provide that there is an absolute duty on a ship-owner to
ensure the seaworthiness of the ship before the ship sails, and this
absolute duty ends once the ship has sailed. To be seaworthy, the
vessel must not only be not overloaded, cargo properly stowed, the vessel
must not be undermanned, and officers & crew must be efficient.
Furthermore, if the vessel is warranted neutral, she must be properly
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documented. However, depending upon the facts and circumstances of
the cases, there are variations in judicial responses in different
jurisdictions.
The expression ‘seaworthiness’ has been a subject matter of
intense elucidation by the judges and critics, it doesn’t merely mean
that the carrier has to provide a seaworthy vessel to fight common perils
of the sea, instead so many other conditions. Within the common law
legal system, it depended upon the documents and circumstances in
each case.
This concept of seaworthiness enshrined in the Act is derived
from the celebrated case of Dixon v Sadler17
. The plaintiffs insured the
ship John Cook and her cargo with the defendants under a time policy
of insurance. Whilst approaching Sunderland on passage from
Rotterdam, having embarked the pilot, the master and crew discharged
part of the ballast, as was the usual practice, in readiness for loading
cargo. But, when a sudden, violent squall was encountered, her stability
was so reduced that she was blown on her beam ends and wrecked.
When the plaintiffs claimed for a total loss, the underwriters rejected
the claim, on the basis that she had been rendered unseaworthy by the
negligence of the master and crew. The court ruled that the underwriters
were liable for the loss. The shipowner was not responsible for
subsequent deficiencies in the vessel caused by the master and crew.
The decision in the lower court was later affirmed in the Exchequer
Chamber.18
In M/s. Adani Enterprises Limited vs United India Insurance
Company19
, it was held that the insurance company was just in
repudiating the claim on account of misrepresentation/active
concealment made by the insured at the time of taking the policy. The
assured had failed to disclose material facts relating to the ship. The
vessel was unseaworthy and unfit to carry the consignment even at the
17 Dixon v Sadler (1839) 5 M&W 405; (1841) 8 M&W 894
18 Cases and Materials on Marine Insurance Law, Susan Hodges, Cavendish
Publishing Limited, London, 1999
19 National Consumer Disputes Redressal Commission, New Delhi, Consumer
Case No. 521 of 2014, on 23 May, 2018
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time of loading and that the unseaworthiness had resulted in sinking.
The Class Certificate on the basis of which it was claimed to have been
selected for charter was found to be not genuine. Therefore, the contract
of insurance was void.
In QuebecMarine InsuranceCo VsCommercial Bank of Canada20
,
Ship insured from Montreal to Halifax, N S. When she sailed there was
a defect in the boiler. This defect became patent in the sea adventure
in its passage on river St. Lawrence. She came back to Montreal, and
after repairs, she commenced the voyage again, and was lost in bad
weather. Held, the vessel was un-seaworthiness when the voyage
commenced. The underwriters were thus not liable. To be seaworthy,
the vessel must not only be not overloaded, cargo properly stowed, the
vessel must not be undermanned, and officers & crew must be efficient.
Furthermore, if the vessel is warranted neutral, she must be properly
documented.
In Thomas Vs London & Provincial Marine & General Insurance Co.
Ltd21
, wherein the vessel was insured under a time policy was sent in an
unseaworthy condition, with privity of the assured, by reason of having
an insufficient and incompetent crew. Vessel sprang a leak in fair
weather, but owing to an inefficient crew, the watertight doors and
sluices cover could not be closed and a reason the vessel sank. It was
held that the insurers were not liable. For this implied warranty to apply
is necessary that the assured is privy to un-seaworthiness & loss is
directly attributable to such un-seaworthiness.
In Morris v. Oceanic Steamship Go22
, it was held that the carrier
should not be liable for loss or damage occasioned by any latent defect
in hull, machinery or appurtenances or unseaworthiness of the ship,
even existing at the time of shipment or sailing on the voyage, provided
the owners have exercised due diligence regarding ascertaining of
seaworthiness. Where a bill of lading containing a provision excluding
liability for loss or damage of any kind arising or resulting from
unseaworthiness (whether or not due diligence shall have been exercised
20 Quebec Marine Insurance Co v. Commercial Bank of Canada
(1870) LR 3 PC 234
21 (1914) 30 TLR 595
22 16 T.L.R. 533
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by the carrier, his servant or his agent or others to make the vessel
seaworthy the trial judge in holding the clause sufficiently widely drafted
to exclude all liability for unseaworthiness, rejected the claimants
argument.
In Burjor F.R. Joshi vs Ellerman City Lines Limited23
, the Bombay High
Court held that when goods are damaged due to unseaworthiness, unless
there is an exception of unseaworthiness in the charter party or the bill
of lading, the ship-owner will be liable.
The Supreme Courtin M.V. Elisabeth and ors vs Harwan Investment
and Trading24
, held that the High Courts are superior courts of records
with unlimited jurisdiction with inherent and plenary powers to decide
on their own jurisdiction to redress grievances according to the
principles of natural justice, equity and good conscience where
statutes are silent and judicial intervention is required. Similarly,
while dealing with the issue of limitation of the claim of damage in the
case of an unseaworthy vessel in the East and West Steamship v. S.K.
Ramalingam Chettiar,25
the Apex Court held that one year period to
bring suits in connection with loss or damage to cargo under bills of
lading, has categorically held that the one year period provided by CGSA
and the bill of lading is not only a period of limitation but also
extinguishment of the right to sue the carrier on the expiry of one year
after delivery of the goods or from the date when the goods ought to
have been delivered.
Thus the concept of seaworthiness was as interpreted by Indian Courts
and foreign Courts place a legal duty on ship owners and carriers to
furnish a vessel fit for its purpose. The availability of insurance and the
legal ability to exclude liability for damage to cargo as an uncommon
carrier altered this state of affairs robust insurance regime taking into
account the sea-worthiness aspect will provide for the developments of
lucrative trades whereby the profits from successful voyages outweighed
occasional losses, charter parties which placed the responsibility for loss
23 (1925) 27 BOMLR 1098
24 1993 SCC Supl. (2) 433
25 1960 AIR 1058
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of a vessel on the charterer. An understanding of the complexities of
seaworthiness is a great challenges to the maritime lawyers and growth
of the maritime industry and jurisprudence of Seaworthiness.
CONCLUSION
The diversity of the legal regimes with respect to seaworthiness in
different jurisdictions, makes it slightly difficult to conduct marine
insurance business which has also certain consequences for the parties
to contract, particularly the assured, who will have difficulty in
understanding the coverage of foreign insurance market. Without the
uniformity in the national marine insurance legal regimes, the
international conduct of marine insurance, particularly from the insured
perspective, would be severely impeded. Given the international
character of marine insurance, there is a need for harmonization of the
legal regimes governing the rights and obligation of the parties to the
insurance contract involving international transport and trade. The
Indian Marine Insurance Act itself being a codification of previous case
laws, an appreciation of past authorities is not only an essential
requirement to the understanding of the legal concepts generally, but
also of paramount importance when wishing to gain an insight into the
very constitution of the sections within the Act especially the concept of
“seaworthiness”. The shipping industry has undergone sea change so
does the insurance sector, hence these two sectors confront with a
complex system linked with some unique business models and
technological upgradation. Under this scenario, it would be a mistake
to consider the concept of seaworthiness in its traditional sense and
meaning and, furthermore, address outstanding issues with the usual
approach, ignoring the new vistas of technological improvements.
However, it seems that there is nothing to stop the courts and arbitrators
from considering seaworthiness with reference to the effect of a breach
of the obligation and the legal realities of shipping and insurance
industry in the 21st century.
12

Seaworthiness published

  • 1.
    1Journal a b c d e f g h KLJ - 01/01/2019 THE KERALALAW JOURNAL 2019 (1) KLJ Journal a b c d e f SEAWORTHINESS IN MARINE INSURANCE By Adv. Sujata Kumari Muni & Adv. Sanjeeb Panigrahi Supreme Court of India. “Shipping in the 21st century underpins international commerce and the world economy as the most efficient, safe and environmentally friendly method of transporting goods around the globe. We live in a global society which is supported by a global economy – and that economy simply could not function if it were not for ships and the shipping industry”1 INTRODUCTION According to Tetley, seaworthiness may be defined as “the state of the vessel in such a condition, with such equipment, and manned by such a master and crew, that normally the cargo will be loaded, carried, cared for and discharged properly and safely on the contemplated voyage.” According to Section 41(4) of The Marine Insurance Act, 1963, a ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the sea of the adventure insured. Seaworthiness is an important concept in Maritime Law, the effect of the term is not confined to one area of the shipping industry— it affects Marine, Marine Insurance, Marine Pollution, Carriage of Goods by Sea, Liability, etc. As a result, these issues are dealt under different areas of law, and it has been covered by both national laws and international conventions. 1 International Maritime Organization, International Shipping, Carrier of World Trade; https://business.un.org/en/entities/13 37
  • 2.
    KERALA LAW JOURNAL2019 (1) KLJ2 a b c d e f g h KLJ - 01/01/2019 Vessel seaworthiness is not limited to the physical fitness of the vessel itself, but it further extends to cover the vessel’s equipment, competency of the seamen, documentation and all other issues that might affect the fitness of the vessel and its efficiency to encounter the ordinary perils of the sea. Consequently, this kind of seaworthiness is divided into physical seaworthiness, human seaworthiness and documentary seaworthiness. The physical seaworthiness2 of the vessel deals with the state of the vesselitself, i.e. it’s readiness toencounterthe ordinary perils of the sea that it might face during its voyage, taking into consideration the type of the vessel, its age, the type of navigational water, the route it is going to take, and the time of the year at which it is going to embark on the journey. The human seaworthiness of the vessel involves human errors causing marine accidents. A report commissioned by the Marine Directorate of the Department of Transport entitled “The Human Element in Shipping Casualties” found that the human element was present in a large proportion of Marine Casualties: it was present in 90 per cent of collisions and groundings, and in more than 75 per cent of contacts and fire/explosions. Even though the ship is physically seaworthy, it may not have a competent crew with special knowledge regarding the vessel, and this could increase the possibility of its being involved in an accident that could lead to damage or loss of the cargo, human casualties or loss of property. Hence, the vessel should be provided with a competent crew and other necessary physical assets by the carrier. Documentary seaworthiness signifies that the carrier is required to have onboard certain documents to ensure its safe sailing and to comply with both national and international rules, regulations and other regulatory norms. The documents include navigational documents necessary for safe navigation, ship’s plans which are important to show how the ship’s parts can be dealt with and operated without compromising the safety of the vessel, her crew and cargo. The documents which are important for the vessel to be able to load, unload or sail to its destination should also be accompanied. Such documents are very important to enable the vessel to enter or leave ports and might include ISM or ISPS documentation. It is imperative that the documents are kept up-to-date. THEORETICAL FRAMEWORK The doctrine of seaworthiness in Maritime Law has been developed to protect the different interests exposed to the perils of the marine adventure. The jurisprudence of seaworthiness developed by American 2 The Madeleine [1967] 2 Lloyd’s Rep 224 38
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    3Journal a b c d e f g h KLJ - 01/01/2019 Courtsin 1789 harping on a contract theory. Under such contractual obligations, recovery was sought for wages under the contract of employment rather than for physical injury. In the late nineteenth century, the judicial trend was to examine both contractual duties of seaworthiness and the emerging common-law tort duties of the employer to provide a safe place to work. The tort damages were recovered for injuries caused by unsafe and unfit conditions on board ship by the maritime workers. Later the federal judiciary expanded seaworthiness beyond the confines of common-law employer’s liability. Until the nineteenth century, Maritime Law was governed by the national laws of different countries, e.g. the Common law in the UK and US Harter Act etc. However, because of the international nature of the Carriage of Goods by Sea there was a need to unify the rules governing maritime activities in general, and carriage of goods by Sea in particular, in order to ensure that the parties to any maritime activity are aware of the result of the breach of agreements by either party. This resulted in the introduction of different maritime conventions to govern different aspects of maritime transactions, e.g. liability, pollution, carriage of goods, safety and security, collision, Maritime Liens and Mortgage etc. The first convention on seaworthiness in the context of Marine insurance was the Unification of Certain Rules of Law relating to Bills of Lading, Brussels, 1924 (The Hague Rules)3 and this convention was the first International instrument to change the nature of the carrier’s obligation to provide a seaworthy vessel. The nature of duty also underwent certain changes like the absolute duty of exercising due diligence to make the vessel seaworthy. The convention also provided detailed articles to deal with the issue of seaworthiness and basis of liability of the carrier. However, this convention was amended by Visby Amendments in 19684 which is now holding the field as it is widely accepted and most applicable rules in the Carriage of Goods by sea route. This convention was also followed by the United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules) in 19785 , though it came into force in 19926 . The convention differed, with respect to seaworthiness, in many ways like (i) it did not deal with seaworthiness in a separate detailed article, (ii) The duty of the carriers to exercise due diligence was extended to the whole period when the carriers have custody of the cargo, (iii) It made the carrier responsible for the loss of 3 http://www.admiraltylawguide.com/conven/haguerules1924.html 4 https://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/ portrait.pdf 5 http://www.admiraltylawguide.com/conven/hamburgrules1978.html 6 http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/ Hamburg_rules.html 39
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    KERALA LAW JOURNAL2019 (1) KLJ4 a b c d e f g h KLJ - 01/01/2019 or damage to the cargo unless he was able to prove his innocence. (iv) Finally, it did not provide the carrier with a list of exceptions to limit his liability. These differences and maybe some other reasons why many countries did not sign this convention for so long. There are about 34 countries which have signed and ratified this convention7 . Another Convention which has on important impact on the issue of Seaworthiness is the International Convention on Safety of Life at Sea (SOLAS) 1974, especially Chapter IX which adopted the International Safety Management Code (ISM) and came into force in two stages i.e. in July 1998 and July 2002, and Chapter XI which incorporates the International Ship and Port Facility Security (ISPS) Code which came into force in July 2005. These two Codes guide the safety and security aspects of the shipping industry and impose certain obligations on shipping companies to comply with their requirements8 . Finally, the shipping industry, like any other industry, is always on the move and developing to meet the needs of the trade, therefore, the laws governing it should be updated or changed to meet the changes in the industry. It is for this purpose, the Committee Maritime International (CMI) and the United Nation Commission on International Trade Law (UNCITRAL) worked together on new Draft Instrument on Transport Law. This Instrument affects the carrier’s obligation of seaworthiness in different ways that is, (i) the time at which the Carrier should exercise his duty, (ii) the Carrier’s basis of liability and burden of proof, (ii) the protections the carrier has to limit his liability. The United Nations Commission on International Trade Law(UNCITRAL) and its Working Group III (Transport Law) prepared the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (“The Rotterdam Rules”) from 2002 to 2008 (the ninth to the twenty- first sessions of Working Group III and the forty-first session of UNCITRAL)9 . On December 11, 2008, during its 63rd session, the UN General Assembly adopted the Rotterdam Rules. The Rotterdam Rules opened for signing in September 2009. Since then, 25 countries have signed and three countries have ratified the convention. The main objective of this rule was to ensure global uniformity in maritime rules i.e. to provide a new regime that is intended to replace all of the other rules currently in place10 . 7 http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/ Hamburg_status.html 8 http://www.imo.org/en/about/conventions/listofconventions/pages/ international-convention-for-the-safety-of-life-at-sea-(solas),-1974.aspx 9 http://www.uncitral.org/pdf/english/texts/transport/rotterdam_rules/ Compilation_of_Reports.pdf 10 https://www.shippingsolutions.com/blog/the-rotterdam-rules 40
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    5Journal a b c d e f g h KLJ - 01/01/2019 THECURRENT LEGAL FRAMEWORK OF SEAWORTHINESS Seaworthiness is a concept that runs through maritime law in at least four contractual relationships. In a marine insurance voyage policy, the assured warrants that the vessel is seaworthy. A carrier of goods by sea owes a duty to a shipperof cargo that the vessel is seaworthy at the start of the voyage. A shipowner warrants to a charterer that the vessel under the charter is seaworthy; and similarly, a shipbuilder warrants that the vessel under construction will be seaworthy11 . The growth of the maritime sector in India over the past decades has been quite phenomenal. The importance of the shipping industry in India and on the international commerce can be evidenced from the fact that 90% of the world trade is carried by sea. Maritime law in India is an interesting branch of law which includes, ship financing, maritime liens, carriage of goods by sea; marine insurance; laws of ownership and registration of ships; ship sale and building contracts, limitation of liability, ship mortgages; manning of ships; the law of collisions, salvage, towage and pilotage; claims and priority of the same; the law of marine pollution, as well as the Customs and Port laws. All these aspects are governed by a number of legislation in India, most of them are pre- independence legislation on the subjects though many have been amended from time to time to make it more relevant. Most of the current maritime laws in India has yoked from its colonial past, namely, the Admiralty Offences (Colonial) Act, 1849, the Inland Steam vessels Act, 1917; the Coasting Vessels Act, 1838; the Indian Registration of Ships Act, 1841; the Indian Registration of Ships Act (1841) Amendment Act, 1850; the Indian Ports Act, 1908; the Indian Merchant Shipping Act, 1923; the Merchant Seamen (Litigation) Act, 1946; the Control of Shipping Act, 1947; the Merchant Shipping Laws (Extension to Acceding States and Amendment) Act, 1949, the Territorial Waters Jurisdiction Act, 1878, etc. In addition to the above, a series of legislative efforts of British Parliament, promulgated between 1823 and 1940, governed various aspects of Indian shipping, including ship-owners’ liability, salvage, certification of seafarers, safety and load line conventions. For determination of disputes, the admiralty jurisdiction of Indian Courts began with Letters Patent, 1862 which vested the High Courts of Judicature at Madras, Bombay and Fort William in Bengal with jurisdiction for trial and adjudication of maritime-related disputes arising in India, which was however, confirmed by the Colonial Courts of Admiralty (India) Act, 189112 . By the Colonial Courts of Admiralty 11 https://en.wikipedia.org/wiki/Seaworthiness_(law) 12 Clause 32, the Letters Patent, 1862; explicitly declared the High Courts of Judicature at Madras, Bombay and Fort William in Bengal as Courts of Admiralty or of Vice Admiralty. 41
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    KERALA LAW JOURNAL2019 (1) KLJ6 a b c d e f g h KLJ - 01/01/2019 Act, 1890, the provisions of the Admiralty Court Act, 1840, and the Admiralty Court Act, 1861, were governing the Courts in British India, as they were Courts of law in British possession13 . After independence, the jurisdiction of Admiralty Courts in India was still restricted to the claims as enumerated in the aforestated British legislations, but in 1992, the Supreme Court of India in M. V. Elisabeth14 categorically held that High Courts in India are superior Courts of records with unlimited jurisdiction with inherent and plenary powers to decide on their own jurisdiction to redress grievances according to what is perceived to be principles of justice, equity and good conscience where statute is silent and judicial intervention is required. Accordingly, the Apex Court has made the principles of International Convention on Maritime Laws applicable in India’s common law instead of the age old British legislation. The Government of India in 2005 circulated a draft bill for an Admiralty Act, 2005, seeking to repeal all of the aforementioned obsolete legislations and in their place, to bring into existence a comprehensive law to regulate the claims, jurisdiction, procedure, etc., in Admiralty in India15 . It is pertinent to point out that, in addition to the above legislation, there are several other legislation applicable in India which directly or indirectly relate to maritime law, they are, the Indian Merchant Shipping Act, 1958; the Indian Carriage of Goods by Sea Act, 1925; the Indian Bills of Lading Act, 1856; the Multimodal Transportation of Goods Act, 1993; the Major Port Trusts Act, 196316 ; the MarineInsurance Act, 1963; the Contract Act, 1872; the Sale of Goods Act, 1930; the Evidence Act, 1872; the Indian Penal Code, 1860; the Transfer of Property Act, 1882; the Civil Procedure Code, 1908; the Criminal Procedure Code, 1973; the Limitation Act, 1963; the Companies Act, 1956; the Arbitration and Conciliation Act, 1996; the Maritime Zones of India (Regulation of Fishery by Foreign Vessels) Act, 1981; the Safety of Maritime Navigation and Fixed Platform on Continental Shelf Act, 2002; the Territorial Waters Continental Shelf – Exclusive Economic Zone and Other Maritime Zones Act, 1976, etc. 13 By S.22 of the Supreme Court of Judicature (Consolidation) Act, 1925, the questions or claims in relation to which the High Courts had admiralty jurisdiction, were listed out, and those were the claims for which a claimant could approach the Admiralty Courts in India for reliefs. 14 M. V. Elisabeth v. Harwan Investment and Trading Pvt. Ltd., AIR 1993 SC 1014 : (1993) Supp. 2 SCC 433 15 "Admiralty Bill, 2005", http://www.prsindia.org/billtrack/the-admiralty- bill-2005-160/, [accessed on 14th January 2013]. 16 The Major Port Trusts Act, 1963 deals with the administration of the ports and the jurisdiction over ships in ports. 42
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    7Journal a b c d e f g h KLJ - 15/01/2019 Seaworthinessis a concept that runs through maritime law is borne out of contractual relationships. In a marine insurance voyage policy, the objective of the insurance cover is to ensure that there is an assured warranty that the vessel is seaworthy. Since the issue pertains to transactions beyond geographical boundaries of the countries, a slew of international conventions are in place to smoothen the shipping transactions. A Convention that has a significant impact on the issue of Seaworthiness is the International Convention on Safety of Life at Sea (SOLAS) 1974, especially Chapter IX which adopted the International Safety Management Code (ISM) and came into force in two stages July 1998 and July 2002, and Chapter XI which incorporates the International Ship and Port Facility Security Code (ISPS) Code which came into force in July 2005. These two Codes affect the safety and security aspects of the shipping industry and impose certain obligations on shipping companies to comply with their requirements. Under the Indian law on Seaworthiness, the marine insurance cover mainly governed by Indian Marine Insurance Act, 1963. Section 41 of the Act deals with the Warranty of seaworthiness of ship —”(1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured. (2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port. (3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage. (4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured. (5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to seaworthiness.” 7
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    KERALA LAW JOURNAL2019 (1) KLJ8 a b c d e f g h KLJ - 15/01/2019 Apart from these legislations, there are judgements of various courts in India, which has laid down general principles of maritime law as is recognised and practised in India. The seaworthy condition of the vessel has a direct impact on the right of the carrier/ship-owner to claim compensation from his insurers in case of loss or damage to the ship or its cargo. While issuing an insurance policy for a vessel, the insurer(s) will assume, while estimating the premium, that the vessel is deemed to be seaworthy at the Commencement of the voyage. Under the Insurance Act, the assured is under a legal obligation to disclose all material information and circumstances known to him or else his insurance contract can be void. Whenever the insurance policy does not mention specifically about the seaworthiness of the vessel, the courts generally interpret the intention of the contract against the insurer. The courts presume that the issues with respect to classification is known to the insurer and he cannot deny liability as he was aware of the risk associated. In the case of marine insurance contract, the ship-owner or cargo owner likely to sign the insurance contract made by the insurer therefore if the insurer made any ambiguity relating to the seaworthiness issues, he will not be allowed to gain from the ambiguity he created. However, in order to avoid delays and unnecessary litigation cost it is better the assured get the terms clarified before taking the policy. JUDICIAL RESPONSE TO THE CASES OF BREACH OF WARRANTY IN SEAWORTHINESS The questions of what duties a shipper is to perform with regards to the seaworthiness of a ship is tied to the question of allocation of risks and liabilities of damage which comes to the shoulder of the insurance company whenever there is any force majeure event during the voyage. The common law rules and the Hague-Visby rules provide different standards with respect to seaworthiness of the vessel. The common law rules provide that there is an absolute duty on a ship-owner to ensure the seaworthiness of the ship before the ship sails, and this absolute duty ends once the ship has sailed. To be seaworthy, the vessel must not only be not overloaded, cargo properly stowed, the vessel must not be undermanned, and officers & crew must be efficient. Furthermore, if the vessel is warranted neutral, she must be properly 8
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    9Journal a b c d e f g h KLJ - 15/01/2019 documented.However, depending upon the facts and circumstances of the cases, there are variations in judicial responses in different jurisdictions. The expression ‘seaworthiness’ has been a subject matter of intense elucidation by the judges and critics, it doesn’t merely mean that the carrier has to provide a seaworthy vessel to fight common perils of the sea, instead so many other conditions. Within the common law legal system, it depended upon the documents and circumstances in each case. This concept of seaworthiness enshrined in the Act is derived from the celebrated case of Dixon v Sadler17 . The plaintiffs insured the ship John Cook and her cargo with the defendants under a time policy of insurance. Whilst approaching Sunderland on passage from Rotterdam, having embarked the pilot, the master and crew discharged part of the ballast, as was the usual practice, in readiness for loading cargo. But, when a sudden, violent squall was encountered, her stability was so reduced that she was blown on her beam ends and wrecked. When the plaintiffs claimed for a total loss, the underwriters rejected the claim, on the basis that she had been rendered unseaworthy by the negligence of the master and crew. The court ruled that the underwriters were liable for the loss. The shipowner was not responsible for subsequent deficiencies in the vessel caused by the master and crew. The decision in the lower court was later affirmed in the Exchequer Chamber.18 In M/s. Adani Enterprises Limited vs United India Insurance Company19 , it was held that the insurance company was just in repudiating the claim on account of misrepresentation/active concealment made by the insured at the time of taking the policy. The assured had failed to disclose material facts relating to the ship. The vessel was unseaworthy and unfit to carry the consignment even at the 17 Dixon v Sadler (1839) 5 M&W 405; (1841) 8 M&W 894 18 Cases and Materials on Marine Insurance Law, Susan Hodges, Cavendish Publishing Limited, London, 1999 19 National Consumer Disputes Redressal Commission, New Delhi, Consumer Case No. 521 of 2014, on 23 May, 2018 9
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    KERALA LAW JOURNAL2019 (1) KLJ10 a b c d e f g h KLJ - 15/01/2019 time of loading and that the unseaworthiness had resulted in sinking. The Class Certificate on the basis of which it was claimed to have been selected for charter was found to be not genuine. Therefore, the contract of insurance was void. In QuebecMarine InsuranceCo VsCommercial Bank of Canada20 , Ship insured from Montreal to Halifax, N S. When she sailed there was a defect in the boiler. This defect became patent in the sea adventure in its passage on river St. Lawrence. She came back to Montreal, and after repairs, she commenced the voyage again, and was lost in bad weather. Held, the vessel was un-seaworthiness when the voyage commenced. The underwriters were thus not liable. To be seaworthy, the vessel must not only be not overloaded, cargo properly stowed, the vessel must not be undermanned, and officers & crew must be efficient. Furthermore, if the vessel is warranted neutral, she must be properly documented. In Thomas Vs London & Provincial Marine & General Insurance Co. Ltd21 , wherein the vessel was insured under a time policy was sent in an unseaworthy condition, with privity of the assured, by reason of having an insufficient and incompetent crew. Vessel sprang a leak in fair weather, but owing to an inefficient crew, the watertight doors and sluices cover could not be closed and a reason the vessel sank. It was held that the insurers were not liable. For this implied warranty to apply is necessary that the assured is privy to un-seaworthiness & loss is directly attributable to such un-seaworthiness. In Morris v. Oceanic Steamship Go22 , it was held that the carrier should not be liable for loss or damage occasioned by any latent defect in hull, machinery or appurtenances or unseaworthiness of the ship, even existing at the time of shipment or sailing on the voyage, provided the owners have exercised due diligence regarding ascertaining of seaworthiness. Where a bill of lading containing a provision excluding liability for loss or damage of any kind arising or resulting from unseaworthiness (whether or not due diligence shall have been exercised 20 Quebec Marine Insurance Co v. Commercial Bank of Canada (1870) LR 3 PC 234 21 (1914) 30 TLR 595 22 16 T.L.R. 533 10
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    11Journal a b c d e f g h KLJ - 15/01/2019 bythe carrier, his servant or his agent or others to make the vessel seaworthy the trial judge in holding the clause sufficiently widely drafted to exclude all liability for unseaworthiness, rejected the claimants argument. In Burjor F.R. Joshi vs Ellerman City Lines Limited23 , the Bombay High Court held that when goods are damaged due to unseaworthiness, unless there is an exception of unseaworthiness in the charter party or the bill of lading, the ship-owner will be liable. The Supreme Courtin M.V. Elisabeth and ors vs Harwan Investment and Trading24 , held that the High Courts are superior courts of records with unlimited jurisdiction with inherent and plenary powers to decide on their own jurisdiction to redress grievances according to the principles of natural justice, equity and good conscience where statutes are silent and judicial intervention is required. Similarly, while dealing with the issue of limitation of the claim of damage in the case of an unseaworthy vessel in the East and West Steamship v. S.K. Ramalingam Chettiar,25 the Apex Court held that one year period to bring suits in connection with loss or damage to cargo under bills of lading, has categorically held that the one year period provided by CGSA and the bill of lading is not only a period of limitation but also extinguishment of the right to sue the carrier on the expiry of one year after delivery of the goods or from the date when the goods ought to have been delivered. Thus the concept of seaworthiness was as interpreted by Indian Courts and foreign Courts place a legal duty on ship owners and carriers to furnish a vessel fit for its purpose. The availability of insurance and the legal ability to exclude liability for damage to cargo as an uncommon carrier altered this state of affairs robust insurance regime taking into account the sea-worthiness aspect will provide for the developments of lucrative trades whereby the profits from successful voyages outweighed occasional losses, charter parties which placed the responsibility for loss 23 (1925) 27 BOMLR 1098 24 1993 SCC Supl. (2) 433 25 1960 AIR 1058 11
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    KERALA LAW JOURNAL2019 (1) KLJ12 a b c d e f g h KLJ - 15/01/2019 of a vessel on the charterer. An understanding of the complexities of seaworthiness is a great challenges to the maritime lawyers and growth of the maritime industry and jurisprudence of Seaworthiness. CONCLUSION The diversity of the legal regimes with respect to seaworthiness in different jurisdictions, makes it slightly difficult to conduct marine insurance business which has also certain consequences for the parties to contract, particularly the assured, who will have difficulty in understanding the coverage of foreign insurance market. Without the uniformity in the national marine insurance legal regimes, the international conduct of marine insurance, particularly from the insured perspective, would be severely impeded. Given the international character of marine insurance, there is a need for harmonization of the legal regimes governing the rights and obligation of the parties to the insurance contract involving international transport and trade. The Indian Marine Insurance Act itself being a codification of previous case laws, an appreciation of past authorities is not only an essential requirement to the understanding of the legal concepts generally, but also of paramount importance when wishing to gain an insight into the very constitution of the sections within the Act especially the concept of “seaworthiness”. The shipping industry has undergone sea change so does the insurance sector, hence these two sectors confront with a complex system linked with some unique business models and technological upgradation. Under this scenario, it would be a mistake to consider the concept of seaworthiness in its traditional sense and meaning and, furthermore, address outstanding issues with the usual approach, ignoring the new vistas of technological improvements. However, it seems that there is nothing to stop the courts and arbitrators from considering seaworthiness with reference to the effect of a breach of the obligation and the legal realities of shipping and insurance industry in the 21st century. 12