Claim for total loss under a marine insurance policy
International trade largely depends on the shipping industry. About ninety percent of the goods traded are transported around the world by sea. However, a sea voyage is not always smooth or safe. There are many cases where ships do not reach their destination. Despite the safety measures taken, accidents do occur due to weather conditions, ship-to-ship collisions, groundings, alliances, fires, piracy, equipment failures and other navigation issues. The losses suffered by ships are mainly classified as partial and total losses.
In marine insurance, a total loss can be either an actual total loss or a presumed total loss. As Özlem Gürses comments in Marine Insurance Law (2015), “both are equally total losses, ie the insured has the right to claim a loss of the whole of the insured object” .
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According to the United Kingdom’s Marine Insurance Act 1906, actual total loss means that the ship / vessel is destroyed, damaged or ceases to exist. An implied total loss means that a ship cannot be recovered from the loss due to unavoidable circumstances. In the event of an implied total loss, the cost of recovering the insured item is greater than the value of the actual item. Therefore, these losses are treated as total losses. Shipowners take precautions to cover themselves against such huge losses with insurance contracts. A maritime insurance contract is a contract by which the insurer undertakes to take the risks arising from the maritime adventure and to indemnify the insured against the risks contracted. The risks are pre-contracted and pre-conditioned. Both parties mutually agree on the risks.
When it comes to marine insurance, ship owners, charterers and cargo owners have different types of insurance requirements. Marine insurance generally covers the hull (body of the vessel) and machinery (H&M), freight, vessel liabilities and cargo. Each type of object has its own insurance coverage.
In cargo insurance, more than one party is involved. The cargo of the ship belongs to a third party. In a common situation, the cargo owner arranges the cargo insurance coverage to protect them from any kind of danger. Although there are many types of marine insurance, virtually a good number of insurers and insurance policies can be involved in a single incident.
The insurance policy comes into play when an incident occurs. To claim under the policy, the insured and the insurer have their obligations. Depending on how the parties perform their duties, the parties will be liable or entitled to the insurance claim.
As an example, in the event that the owner of the cargo claims a total loss due to the sinking of the vessel, the obligation of the insured to claim under the insurance policy is to submit the policy to original insurance, original bills of lading, shipping documents, notice of abandonment, captains protest note, copy of L / C (letter of credit), vessel classification record, investigation report, fortune and media report.
The Marine Insurance Act of 1906 mentions the requirement of the notice of abandonment to the insurer. This notice serves as a statement that the insured has surrendered all interest left in the insured vessel regarding the total loss claim. If notice is not served, the claim will be treated as a partial loss, instead of a total loss.
Now the question arises as to how the notice of abandonment should be issued, in cases where the vessel sinks on the high seas with the crew or in cases where the vessel sinks, and the crew members of the ship evacuate the ship in an emergency. The realistic approach is that if the whole ship is destroyed and the crew members lose their lives in the incident or if they leave the ship in an emergency, there would be no one left to issue such a opinion.
The captain has an important position of responsibility alongside the transporter and the owner. They are responsible for monitoring and ensuring the seaworthiness of the vessel. Otherwise, it is a violation of the International Safety Management Code (ISM). In addition, the owner or carrier must comply with the International Convention for the Safety of Life at Sea (SOLAS) and must obtain Safety Management Certificates (SMC) and Documents of Compliance (DOC). In the absence of these documents, insurance cover may be terminated.
It is provided in marine insurance, that shipowners must always act as if there is no insurance, and shipowners must take all possible measures to ensure the safety of the vessel.
In Bangladesh, there is no specific law that deals with marine insurance. Under the Insurance Act 2010, all types of insurance, including marine insurance, are covered. Ultimately, in the event of a total loss during the destruction of the vessel, the insured can take certain measures to mitigate the loss and claim insurance coverage. If the insured takes precautions as a prudent uninsured person to safeguard the insurable object i.e. ship or cargo, the insurer will reimburse the insurance claim to the insured in the circumstances. appropriate.
In the event of a claim for total loss due to the sinking of the vessel with the entire cargo on the vessel, the owners of the cargo can obtain redress through the insurance mechanism if they act swiftly and carefully to protect the vessel. as they would have acted in the absence of any insurance contract. and in accordance with the terms of their contract with the insurer to mitigate further losses, particularly with regard to the pursuit of the party concerned to recover its loss and fulfill the obligation mentioned in the insurance policy. If the insured has timely fulfilled all his obligations under the insurance policy, he is entitled to receive the money as promised under the insurance policy.
The authors are lawyers of mclaw services, being respectively the head of chambers and an apprentice lawyer of mclaw services.