Marine Insurance: The Marine Insurance Act 1906 - Coursework Example

Marine Insurance Word count: 1433 (excluding A marine insurance is considered as one of the oldest forms of insurance. A marine insurance or a maritime insurance acts as the coverage for any damages or other losses of ships. The insurance is liable to provide for the goods that are transferred from one place to the other via sea. The report will highlight the background of marine insurance and will principally focus on the Marine Insurance Act 1906. It will also describe some of the important features of this act. The report will then demonstrate about the marine open cover. In this section the report will portray the features of marine open cover. The report will also emphasize the advantages of a marine open cover. Apart from this the essay will then demonstrate the requirements for formulating a marine insurance. Finally the report will conclude by describing the consequences of breaching a contract. Table of Contents Abstract 2 Introduction: The floating policy MIA 1906 Section 29 4 Marine Open Cover 5 Advantages of a marine open cover 7 Conclusion 9 References 10 12 Bibliography 13 Introduction: The floating policy MIA 1906 Section 29 Marine insurance acts as a cover for damages or losses due to hazards of the sea. Marine insurance is principally used for foreign trade (Publish Your Articles, n.d.). However marine insurance also covers the damage of ships, terminals and cargos in which the goods are transported from the point of origin to the final destination. A marine insurance is an essential contract for importers, exporters and traders who transport goods in a cargo ship from one place to the other (Tfab, 2008). Marine insurance also known as Maritime insurance is the oldest and well developed insurance. Generally there are four types of marine insurances namely Hull insurance, cargo insurance, freight insurance and liability insurance. The insurance is only covered in case of any perils arising in the sea. The threats which get covered under this are fire, pirates, war inside the sea etc (King, 2008, p.4). Eminent personalities like Justice Buller described marine policy as an ‘absurd and incoherent instrument’. However the introduction of marine insurance act 1906 has brought about some consistency and standardization to the subject (Marine-Insurance-UK, n.d.). A marine insurance contract is defined as the contract where the insurer agrees to gives surety to the assured in the context of any marine loss (Business.gov.in, n.d). The section 29 of the marine insurance act is about floating or open insurance. A floating policy can be defined as a type of insurance where the insured value of the goods cannot be calculated precisely. Hence the premium for insuring them can be altered after a certain period of time (Cambridge Dictionaries Online, n.d.). The primary rational behind the use of a floating policy is to facilitate the proprietors of the goods to undertake a number of consignments and each of them is to be covered under the policy. However for every new consignment a policy is issued and conveyed. For example a hauler may agree to enter into a contract where the coverage will be for $1, 00,000 and for a period of 6 months. As the policy is entered automatically all the shipments within the mentioned time frame will fall into the coverage of the insurance. Section 29(3) of the policy states that the assured is required to portray the way in which the shipments will be taking place. In other words whenever there is a transportation the shipper needs to disclose the general nature of the ship and also the total value. This is mainly carried to avoid fraudulent and theft. After the value of the ship is estimated a certain amount will be fixed as the total value of coverage. Apart from that the policy is also liable to mention the nature of perils falling into the contract. Once the phenomenons are accomplished the final policy will then be declared. It also states that until and unless the policy provides a provision, the assured is not authorized to specify the shipments which will be covered and which will not be covered (Jus.uio, n.d.). Marine Open Cover A marine open cover is an agreement between the insurance company and the merchant (Icnz, n.d.). It is generally taken up by large firms. Also open covers are mostly appropriate for the shipper’s who transports regularly (Business link, n.d.). It also requires a declaration that is to be completed either weekly, monthly or quarterly specifying the commodities, vessels involved and the voyages (Accounting Study, n.d). A marine open cover is also not permitted for any renewal and provides only coverage’s to the specified transports whenever the declaration is made. An open cover is mainly intended for the purpose of import and export. Generally an open cover contract is facilitated for a period of 12 months. In this respect the insurance company is agreed to provide coverage to all the transports coming under the range of the open cover. It is also a fact that open cover is not a policy but an unofficial agreement. Therefore whenever new shipment is affirmed, specific policies are subjected as the evidence of agreement and collection of the premiums. The important features of an open cover are as follows:- The contract can be cancelled at any point of time by either side i.e. the assured and the insurer. However either side is liable to provide a notice if they are to undertake such action. Limit of conveyance: - This specifies the limit of load that can be carried by a ship. Credit Balance: - A sufficient amount of credit balance is to be sustained all time. Limitation of the geographic location: - There is an upper limit in respect of the area of coverage. Hence the coverage is up to a certain geographic distance. The terms and condition of the agreement must be properly specified. The most important feature is that termination of inland SRCC is to be done within 48 hours in writing (Scribd, n.d.). Advantages of a marine open cover The advantages of a marine open cover are outlined below:- An “indefinitely open” open cover can be issued which will resolve issues related to expiry (Tfab, n.d). A marine open cover offers an assured coverage at the pre approved rate and condition. It also offers customized policies. In other words a marine open cover can be developed according to the need of the consumer. The protection of goods or the coverage begins from the time when it reaches the hands of the merchants. The damages or the losses are covered even when the perils occur prior to the submission of details about the shipment. The costs that are needed to be incurred by the shipment company are considerably lower, if compared with separate policies. It also circumvents the requirement of any other separate policies. Therefore the company undertaking such cover is not required to undertake policies for each division of the ship. The exporters also hold the capability of offering insurance at the price of the goods. This can be done during the time of discussing or negotiating the sales price. The payment method of the premium can also be customized according to the need of the consumer. The customers can pay the premium monthly, quarterly or annually according to the user’s convenience (Chartis insurance, n.d.). Requirements for observing the operations A marine insurance contract is based upon the admirable relationship among both the parties. If the level of understanding is not maintained by either of the party, then the contract may be circumvented by one of the parties (Nigeria-law, n.d.). In this process there are certain things which need to be disclosed by the assured to the insurer. As, if certain things are not revealed by the assured the insurer may evade the contract. Therefore the thing that needs to be disclosed by the assured is the circumstances which hold the any possibility of risk (Greenwords Ltd., 2012). Apart from this there are also certain disclosure needs to be taken from the part of the agent. However the most important factor for observing or carrying out such operations is that all the circumstance and other representations must by absolutely true. The contract is supposed to get the final form when the offers made by the assured are accepted by the insurer. After that whether the contract is finalized or not, a memorandum slip is made by the insurer to demonstrate that the proposal of was actually accepted by them (Law.anu, n.d.). Conclusion A contract is said to be the legal binding agreement among the parties involved in it. However sometimes one party may not follow or remain under the obligation of the contract, which may eventually lead to the failure of contract. Such situations are referred to as breach of contract. Consequently the impact of failure of a contract can be severe. The party who is highly affected by the breach of contract is entitled to receive compensation. However the party has to prove that it was an obvious financial loss. While on the other hand the party which has breached the contract holds the liability to explain the reason of such happenings. If this course of action is not carried out immediately, the matter will then reach the court. The court will then may impose fines or can take some other measures to safeguard the interest of the claimant. Apart from this there can be severe loss of reputation which may hugely impact in the future ventures (Qfinance, n.d). Hence every possible resistance and circumstances must be considered before signing a contract. References Accounting Study, No Date. Open Cover (Open Policy). [Online] Available at: [Accessed 02 July 2012]. Business Link, No Date. Moving your goods. [Online] Available at: [Accessed 02 July 2012]. Business.gov.in, No Date. Marine Insurance. [Online] Available at: < http://business.gov.in/manage_business/marine_insurance.php> [Accessed 02 July 2012]. Cambridge Dictionaries Online, No Date. Floating Policy. [Online] Available at: [Accessed 02 July 2012]. Chartis insurance, No Date. Chartis. [Online] Available at: < http://www.chartisinsurance.com/marine-cargo_879_227566.html> [Accessed 04 July 2012]. Greenwords Ltd., 2012. Marine Insurance “The Contract”. [Online] Available at: < http://ourblog.greenwoods.org/marine-insurance-the-contract-2/> [Accessed 02 July 2012]. Icnz, No Date. Marine cargo Open Policy Handbook. [Online] Available at: < http://www.icnz.org.nz/downloads/marine-cargo-handbook.pdf> [Accessed 02 July 2012]. Jus.uio, No Date. English Marine Insurance Act 1906 - An Act to codify the Law relating to Marine Insurance [21st December 1906] England. [Online] Available at: < http://www.jus.uio.no/lm/england.marine.insurance.act.1906/doc.html> [Accessed 04 July 2012]. King, R. O., 2008. Ocean Piracy and its Impact on Insurance. [Pdf] Available at: < http://www.hsdl.org/?view&did=232706> [Accessed 02 July 2012]. Law.anu, No Date. Contract Formation - Offer and Acceptance. [Online] Available at: < http://law.anu.edu.au/colin/lectures/off_acc.htm> [Accessed 02 July 2012]. Marine-Insurance-UK, No Date. About Marine Cargo Insurance. [Online] Available at: < http://www.marine-insurance-uk.net/marinepolicy.htm> [Accessed 04 July 2012]. Nigeria-law, No Date. Marine Insurance Act: Chapter 216. [Online] Available at: < http://www.nigeria-law.org/Marine%20Insurance%20Act.htm> [Accessed 02 July 2012]. Publish Your Articles, No Date. Meaning & Principles of Marine Insurance. [Online] Available at: < http://www.publishyourarticles.org/knowledge-hub/business-studies/meaning-a-principles-of-marine-insurance.html> [Accessed 02 July 2012]. Qfinance, No date. Nonperformance and Breach of Contract. [Online] Available at: < http://www.qfinance.com/performance-management-checklists/nonperformance-and-breach-of-contract> [Accessed 04 July 2012]. Scribd, No Date. Marine Insurance. [Online] Available at: < http://www.scribd.com/doc/6670237/Marine> [Accessed 04 July 2012]. Tfab, 2008. Marine insurance - Are We Really Covered. [Pdf] Available at: [Accessed 02 July 2012]. Tfab, No Date. Marine Insurance. [Online] Available at: < http://www.tfab.org/files/Marine%20Insurance.pdf> [Accessed 02 July 2012]. Bibliography Berwick, G., 2007. The Executives Guide to Insurance and Risk Management. 2nd ed. New South Wales: QR Consulting. Birds, J., 2010. Insurance Law in the United Kingdom. Alphen aan den Rijn: Kluwer Law International. Hodges, S., 1999. Cases and Materials on Marine Insurance Law. London: Routledge. Martin, F., 2004. The History of Lloyds and of Marine Insurance in Great Britain. New Jersey: The Law book Exchange, Ltd. Soyer, B., 2005. Warranties in Marine Insurance. 2nd ed. London: Routledge. Read More