Marine Insurance/Carriage Goods by Sea - Essay Example

The accident occurred when m/s Southern Traders moved forwards suddenly when it had to move backwards. It was damaged substantially. Assuming that it was insured by the owner, MalShip AB, it would have been insured under Hull & Machinery Insurance regulated by International Hull Clauses. Hull Insurance is property insurance which is sought by the ship owner to protect his ship since it is his most valuable asset. Hull Insurance also, to some extent, covers for the liabilities incurred to third parties as a result of a collision.

While defining the scope of the type of damages covered by Hull and Machinery Insurance, the IHC state in clause 2.1.6 that HM & I covers the losses caused to the ship due to “contact with land conveyance, dock or harbour equipment or Installation.” The loss caused to m/s Southern Traders is a total or constructive loss. It is because it is completely destroyed and cannot be put to use again. According to section 57 of Marine Insurance Act, 1906, when a ship is “So damaged as to cease to be a thing of the kind insured”, an actual total loss is occurred.

M/s Southern Traders took great amount of water inside which caused irreparable damage. It is no longer a thing of the kind insured. Therefore, MalShip AB would be `entitled to claim insurance for total loss to their ship i.e. USD 10,000,000. According to the given facts, m/s Southern Traders collided with m/s Bystander during the incident. M/s Bystander sustained only a minor damage but the owners are entitled to receive compensation. As a result of the collision, MalShip AB became liable to the owners of m/s Bystander for the damage caused to the ship.

In this case, the “3/4th Collision Liability” (FD Rose) clause would come into play. The amount of total damage would be calculated and H & M would cover 3/4th or 75% of the liability. The remaining 1/4th or 25% liability would be covered by the respective Protection and Indemnity Club of MalShip AB. P & I Clubs are Protection Societies that attempt to share the risks and losses of the ship owners that are not covered by other insurance policies. Insurance policies are mutually exclusive and complementary so that the loss is shared completely and no amount is recovered twice.

The 25% settlement from P & I is not pre-determined. In this case, H & M would be covering 75% of the liability by statute and 25% would be remaining automatically which then would be covered by P & I club. Therefore, the total liability towards m/s Bystander’s owners would be settled mutually and exclusively by H & M and P & I club. The other major party in question is Grain Importing Company S.A, Lisbon. They held the Bill of Lading and the cargo was in their ownership. M/s Southern Traders was carrying 60,000 tonnes of cargo belonging to GIC out of which 20,000 tonnes were destroyed as a result of the collision.

40,000 tonnes of cargo can easily be construed to be safe and usable in its fullest capacity. Therefore, this is a partial loss and GIC would be able to claim compensation for it. A very important factor in this case is that it is unknown what actually caused the collision. The given facts state that the ship had to be reversed but it suddenly moved forward. From the face of it, it can be understood that such a thing can happen only due the negligence of the commander of the ship. It is the duty of the insured to mitigate the loss to whatever extent that he can.

In this case, the