Page 297 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 13. Insurer - he can reinsure
14. Assignee of the Bill of Lading.

Utmost Good Faith

Marine insurance is a contract of Uberrimae Fidei or Utmost Good Faith. The insured and
insurer must observe utmost good faith in a contract of marine insurance. He must disclose all
those relevant facts to the insurer which are likely to affect his willingness to undertake the risk.
If either party does not disclose full facts the other party can avoid the contract at any time.

Contract of Indemnity

The essence of a marine insurance contract is that it is a contract of indemnity. Under this
contract the underwriter agrees to indemnify the insured against losses by sea risks to the extent
of the amount insured. As a result, the insured can recover only the actual loss suffered and
nothing more.
Principles of Subrogation

The principles of Subrogation and Contribution are applicable to the marine insurance contract.
After meeting the loss agreed, the insurer steps into the shoes of the insured and becomes
entitled to all the right and remedies available to the insured against the insured property or
third persons.

Contribution

The doctrine of contribution also applies to marine insurance. Where the subject matter has been
insured with more than one insurer, each insurer has to pay only the ratable proportion of loss.
If he has paid more than his share of loss, he is entitled to recover the excess paid from his
coinsurers. This principle again supports the concept that the insured cannot recover amounts
on the same property for same peril from more than one insurer. If by chance he has taken cover
from more than one insurer then all of them contribute in the ratio of the sum assured with them
subject to the maximum loss.

Warranties

The principle of warranties applies to a Marine Insurance Contract. According to Marine Insurance
Act, a warranty means a stipulation or term, the breach of which entitles the insurers to avoid
the policy altogether and this is so even though the breach arises through circumstances beyond
the control of the Warrantor. Warranties may be express or implied.
Express Warranties: Express warranty means a warranty, which is expressly stated. It is included
in or written upon the policy or contained in some document referred to in the policy.

Express Warranties usually may be like:
1. The ship is safe on a particular day
2. The ship and goods are neutral and shall continue to be so
3. The ship will proceed to its destination without any deviation

4. The ship will sail on or before a certain day.

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