INSURANCE LAW
PROJECT TITLE: LEGAL ASPECT OF MARINE LAW IN INDIA
SUBMITTED BY:
MUHAMMED ANEES - 16040142080
PARVATHI SUBASH – 16040142092
[Link] (B)
ALLIANCE SCHOOL OF LAW
ALLIANCE UNIVERSITY, BANGALORE.
TABLE OF CONTENT
1 INTRODUCTION
2 BACKGROUND
LITERATURE REVIEW
3
HYPOTHESIS
4
METHODOLOGY
5
RESEARCH AREA & RESEARCH QUESTIONS
6
SCOPE & OBJECTIVES
7
CONCLUSION & BIBLIOGRAPHY
8
INTRODUCTION:
Marine Insurance is not coming from modern times. It can trace its history back to many
centuries. Issues regarding it had obviously existed for a number of years and the legislation on it
had taken a definite form long before 1906, when the English Marine Insurance Act was passed
with a view to codifying the legislation. Trading by sea for India isn't a new mode of trade. India
has one of the world's longest coastlines that links India to other parts of the world. The remains
of a dry dock in the ancient port of Lothal in Gujarat bear proof to this day of thriving sea trade
between that area of India and the Persian Gulf and the Arab Sea. In the current scenario, India
has the largest merchant shipping fleet in the developing world and ranks seventeenth in shipping
tonnage, with more than 90 percent of India's trade volume. When there is a trade by sea, there is
a risk attached to it and Marine Insurance is conducted in order to mitigate this risk. Marine
insurance started in Italy at the end of the 12th century when Chinese merchants distributed their
shipments along with many vessels in order to mitigate shipment damage. Marine insurance laws
in India were subject to changes in the past until the 1963 Marine Insurance Act was enacted by
the Government of India with the intention of codifying the Marine Insurance law. In 1968, at
the UNCTAD conference in New Delhi, the developing nations declared that the worldwide laws
governing marine insurance were not beneficial to the developing countries because their
interests were controlled by the shipping industry and for which a UNCTAD committee was
formed to study the commercial and economic aspects of international laws.1
1
Gaurangi Patil, Reeling Back In History To Understanding Marine Insurance/ Protection & Indemnity Clubs
(P&I), BRUS (Aug. 17, 2014, 11:08 AM), [Link]
2. BACKGROUND:
The shipping and marine insurance situation changed when India's government, led by Mr.
Narshima Rao, India's former prime minister, removed trade barriers between the Indian market
and the global market by adopting liberalization, privatization and globalization principles in
1991. The Indian Government has opened its service sectors, particularly the banking and
insurance sectors, to comply with the GATS13 agreement.2 LPG has brought about a shift in
business structure across all the Indian consumer sectors. And when private companies started
operating in India's insurance industry, government required a regulator to strictly regulate the
insurance sector, which would help the government get business experts to regulate in a way that
will be advantageous to all market participants. Accordingly, the Government of India enacted
the Insurance Regulatory and Development Act of 1999 for the purpose of creating an Authority
to protect the interests of insurance policy holders, to oversee, encourage and ensure an orderly
growth of the insurance industry and in matters relevant to it or incidental to it.3
3. LITERATURE REVIEW:
The Law of Marine Insurance in India by Ambalal Bhikhabhai Gandhi, Accessed on 10th
April 2020.
In this article, the author describes about the principles of Marine insurance law and also Marine
insurance contract and Marine insurance policies. The book also clearly specifies upon the two
legislations called scope of Marine policy.
4. HYPOTHESIS:
2
legal Aspects Of Marine Insurance In India, LAW TEACHER (Aug. 15,2014, 13:05 PM),
[Link]
3
ibid
The manual of Law of Marine Insurance in India prescribes its scope and function but the same
is not limited to its textual content.
5. METHODOLOGY:
The Doctrinal method of the research will be used which involves the collection of data from
primary as well as secondary sources. The primary sources includes various sources like books
written by various eminent authors and secondary sources include articles found in journal,
websites and e-journals and also the internet to find out the latest developments. The paper will
utilize analytical and interpretative method of study.
6. RESEARCH AREA:
The authors here would like to shed light on the definition of Maritime Insurance and its legal
framework by shedding light on the area of Maritime Insurance, which is an essential component
of international trade and trade, and the legal instruments that govern it. The authors will discuss
the legal aspects of Indian Marine Insurance and provide an outline and interpretation of 1963
Marine Insurance Act.
The paper also provides the impact of liberalization, privatization, and globalization (1991) on
the country's maritime industry, which has created a boom in the maritime sector. Some relevant
terms related to maritime law were also discussed in detail along with the description of the
marine insurance framework. The paper is composed of detailed research on the evolution of the
Marine Insurance Legal System, Marine Insurance Contract Principles, Marine Insurance
Strategy and Marine Insurance Industry as it relates to the Indian maritime sector and its global
consequences. The paper consists of in-depth analysis to examine and describe various forms of
marine insurance risks, essence of claims, different types of marine insurance, and different
concepts of marine insurance, loss and abandonment with recent case laws and different types of
marine police.4
7. SCOPE & OBJECTIVES:
4
[Link], A Study of “Trend Analysis in Insurance Sector in India”, 2, IJES, 1, 1 (2013)
Aquatic insurance plans refer to injuries incurred in relation to aquatic adventure. The maritime
insurance policy seeks to compensate for the damages incurred by the underwater adventure.
The scope of the marine insurance policy is not limited to sea risk but also includes land risk.
Fresh India Guarantee to The Hon'ble Supreme Court. Ltd v. Hira Lal Ramesh Chand, argued
that if a marine insurance contract requires warehouse to warehouse distribution as such
contracts often entails inland transit risk because they are incidental to sea transport.
The maritime insurance policy entered into by way of wagering is invalid and cannot be applied
in the Court of Justice. The marine insurance contracts in India are not limited to the Marine
Insurance Act, established in 1963, these contracts are also governed by the Hague Convention
Rules and as they are of international character, they are also applicable to the marine insurance
contracts and are useful in resolving disputes before the courts.5
8. PRINCIPLES OF MARINE INSURANCE:
The insurance industry is conducted on the basis of some fundamental principles that apply to all
forms of insurance, such as life, fire, marine and other insurance contracts, with the exception of
the concept of reimbursement, which is the life for all insurance except life insurance. The
primary insurance concepts (also applicable to Marine Insurance) are discussed below:
a) Principle of Co-operation: This requires exchanging risks and challenges jointly on the
basis of cooperation as insurance is founded on the social welfare philosophy that this
concept is based on the principle of cooperation, i.e. "All for all and one for all." In
Insurance Business risks are protected, for which a common fund is created with the
contribution of a large number of people by way of premium payment and the fund thus
provided by the individuals by donation is paid to the insured person in case of risk
maturity. Through this way, the donation made for all by one and the donation of all are
used to reimburse all of them.
b) Principle of Probability: Insurance Company deals with danger, and the probability of
danger that may or may not occur because there are questions about the quantity of risk
5
Shipping/Maritime Law in India, PAND INDIA (Sept. 13, 2014, 18:13 PM),
[Link]
may exist. Quantum risk levels may be high or low, which would decide the insurance
premium. This premium depends on the amount of risk involved in the insurance policy,
and the probability of risk involved, whereby the premium rate will be higher where the
quantity of risk and its probability is greater.
c) Principle of Insurable Interest: That is both the most essential concept and the legal
prerequisite of a legitimate insurance contract. This principle stipulates that the assured
person must have a real interest in the topic of the insurance. Every individual may have
an interest in the insurance subject matter and may be affected by the risks to which the
insurance subject is exposed. It is not enough for a legitimate insurance policy to be
concluded with the free consent of the competent parties for legal consideration, but it is
also necessary for the insured to have an insurable interest in the subject of insurance.
The lack of insurable interest in the issue of insurance would equate to wagering and it
will become void as provided for in section 30 of the Indian Contract Act, 1872. An
insurable value in its texture and function is sui juris, and unique. The problem of
insurable interest is more relevant especially in marine insurance. Insurable interest is not
full ownership and insurable interest is such an interest in the subject of insurance that the
insured may try to recover the monetary claim for any loss or harm to the insured vehicle.
In the case of maritime insurance at the time of injury, the interest of the insured must
exist and the insured must have some relation or concern with the topic of the insurance.
Insurable interest is not synonymous with legal interest.33 Therefore, an interest in a
purchasing agreement is an insurable interest.
d) Principle of Utmost Good Faith: Insurance contract is an Uberrimae Fidei contract, i.e. a
contract of absolute good faith, and if it is not followed by either party, the insurance
arrangement may be avoided by the other party to the arrangement. According to this
theory, the contracting parties are put under a special obligation towards each other, not
just to prevent misrepresentation, but also to reveal all relevant information in their
awareness. It has been said in Mackenezel v. Conlson that there is no class of documents
on which the strictest good faith is more rightly expected in the courts than insurance
policies. In the L.I.C v. G.M. Channabasamma, Supreme Court was of the opinion that
the insured must have full good faith. Good faith is a basic concept of insurance law
which extends to any form of insurance on the [Link] theory was first stated by
Lord Mansfield in Carter v. Boehm, who is said to be the founder of the theory.
e) Principle of Indemnity: In insurance contracts one of the most relevant concepts is the
concept of indemnity. According to this theory, the insurer decides to pay no more than
the real amount of the insured's loss, that is, the insured will not make profit from his
loss. Some of the arrangements covering property and liability insurance are
reimbursement plans. The very aim of insurance is to return the insured to the same
financial status on loss occurring as he enjoyed right before the loss or harm occurred.
f) Principle of Subrogation: The right to subrogate is considered to be a corollary of the
indemnity principle. It applies to all insurance policies which are indemnity policies by
their definition. The Subrogation doctrine, an egalitarian doctrine, was taken from the
roman law system. Section 79(1) of the 1963 Marine Insurance Act deals with the Right
to Subrogate. Subrogation means one individual be substituted for another. This grants
the insurer the right to benefit from such rights and damages that the insured has against
third parties in respect of the loss to the degree that the insurer has paid for the loss and
remedied this.
g) Principle of Contribution: As subrogation doctrine is the incidence of indemnity
principle, the principle of obligation is the incidence of subrogation doctrine. This rule is
of ancient origin recognised by the Chancery Courts in North British and Mercautile v.
Liverpool and London Glob, whereby it was held that the benefit occurs when the same
individual does the same thing against the same loss, and first of all to prevent a man
from recovering more than the total loss that occurred or recovering the total loss from
the loss that he may have.
9. CONTRACT OF MARINE LAW:
Much of the marine insurance legislation is simply a mere description of the contract found in
the common form of marine policy. The fundamental premise of an insurance contract is that the
insurer's recoverable indemnity is the pecuniary damage sustained under the contract by the
insured individual. Therefore, according to the statute, a marine insurance contract is a contract
whereby the insurer undertakes to indemnify the insured against maritime damages, that is, the
risks incident to maritime adventure, in a manner and to the degree decided therein. A marine
insurance policy can be extended to cover the insured against accidents in inland waters or any
land danger that may be incidental to any sea trip by its express terms or through the use of trade.
Where a ship in the process of construction or the launch of a ship or any adventure similar to a
marine adventure is protected by a policy in the form of a marine policy, the provisions of this
Act shall extend to it, to the degree applicable; however, except as provided for in this section,
nothing in this Act shall change or affect any rule of law applicable to any insurance plan other
than a plan. "The agreement" is the formal document embodying the marine insurance contract;
and "the slip" or "covering note" is the informal memorandum drawn up at the time the contract
is concluded. The subject-matter insured and the insurance factor are called "the interest insured"
and "the premium" respectively. The person who is indemnified is "the insured" and the other
party is known as "the creditor" or "the underwriter" whether he subscribes to or subscribes to
the policy.6
The term "Perils of the sea" applies to hazards which are especially incidental to the sea or to its
navigation. It only applies to fortuitous accidents or marine deaths or caused by the sea. It was
not clear at the time of the accident that there had to be heavy winds and/or waves to trigger "sea
danger. “There has to be some casualties as one of the requisite adventure incidents, something
that could not be foreseen.
In principle marine insurance is a contract of indemnity, however, in practice it by no means
results always in a complete indemnity. In Richards v. Forest Land, Timber and Railways Co.
Ltd. It was observed,
6
Hodges, Susan, CASES AND MATERIALS ON MARINE INSURANCE LAW, Cavendish Publishing Limited, p. 2.
The Act deals merely with a particular branch of contract law, namely marine insurance. The
parties are free to conclude their own contracts and to exclude or change the contractual
requirements, subject to specific obligation clauses or restrictions and general rules of common
law. The aim of both the legislature and the courts was to give effect to the concept of
reimbursement, which is the basic principle of insurance, and to apply it to the various
complexities of fact and law for which it is necessary to function. The law merchant has thus
solved or tried to solve the many problems posed by maritime adventure insurance.
If there is any disparity between the printed clause in a marine policy and the stamped or written
clause, the latter must prevail on ordinary construction principles, because the stamped or written
words are the immediate language and terms chosen by the parties themselves for their
expression of meaning, while the printed words are a generic formula equally adapted to their
case.
10. RESEARCH QUESTION
1. Whether contract of marine insurance has admitted in evidence unless it is embodied in a
marine policy in accordance with the Marine Insurance Act, 1963?
A regulation means a text that includes all of the policy development information and terms and
conditions, overleaf. In politics a maritime contract has to be represented. In compliance with
this Act, 1963, a marine insurance arrangement shall not be accepted as proof unless it is
reflected in a marine policy. The agreement may be enforced and released either before or after
the end of the contract. In our country the custom is to issue "cover notes" similar to slips. As the
custom is not to stamp a 'cover note' only stating the agreement is admissible.
Designation and subject-matter:
The subject-matter insured shall be defined with absolute certainty in a maritime [Link]
existence and degree of the assured's interest in the insured subject-matter must not be defined in
the policy. Where the legislation designates the insured subject-matter in general terms, it shall
be read as relating to the interest intended for protection by the insured. Any use governing the
classification of the subject-matter insured shall be taken into account in the implementation of
this section.
The basic characteristics of the maritime policies are: 1. The insurance plans for the maritime
shipment are readily assignable as the assignor eventually takes the goods through different
hands before the assignor finally takes delivery. Insurance policy assignment is allowed in
respect of sections 52 and 53 of the 1963 Marine Insurance Act.
You may grant a Marine Insurance Policy either before or after the loss.
2. The assignment is rendered by endorsement and distribution, or through some other customary
process.
3. The Claimant's insurable interest must exist at the time of the cargo loss.
4. The insurance policy amount is the total negotiated between insured and insurance provider.
Therefore such measures are often based on decided interest. Since insurance contracts provide
for compensation the loss suffered by the insured is not only the loss suffered by the insured is
not only the loss represented by the value of the goods but also the amount of profit which the
parties would have earned from the sale of those goods.
5. The marine insurance policy is a policy for economic benefits and not mere protection, as this
insurance also allows for benefits against the loss of earnings.
6. The length of the maritime insurance policy is dependent on the cargo clause of the institution
and it is given to include the transit period, the date of discharge of the goods and the date of the
goods 'arrival. The length of the policy usually includes time up to 30 days after the delivery of
the goods in the case of air shipments and 60 days after the delivery of shipments by sea to
enable the cargo from the final port of discharge to be transported to the importer's warehouse.
Before or after the loss, a maritime strategy is assignable 'unless it includes words specifically
preventing assignment.' A commodity policy is generally freely assignable. Merchandise such as
tea, jute and wheat, etc., change hands before entering their destination, and regulations on them
must be transferable freely. Both ship and freight policies are subject to tariff restrictions.
An assignment by the insured of his interest in the insured subject-matter does not transfer his
rights to the assignor thereon in the insurance policy, unless there is an explicit or implied
agreement to that effect. Nevertheless, a transfer of interest in the issue-subject matter covered
by statute, such as death or insolvency-may often serve as a transfer of the policy.
An assured person who has claimed or lost an interest in the insured property cannot ultimately
apply the insurance policy to that property. Unless he has expressly or implicitly agreed to assign
the policy before or at the time of assignment of the property. He can still delegate the policy
after failure though. Marine policy can be delegated in some other usual manner or through
endorsements of the policy itself. The assignor is entitled to sue thereon in his own name after
the declaration of the beneficial interest in the scheme.
2. Whether Malhotra Committee Report and IRDA 1999 plays vital role in Indian Marine
Insurance Law?
In the current emerging open economy scenario, the Government of India has set up a
committee under Mr. [Link] to examine the insurance industry's structure, strength
and weaknesses with regard to the objective of providing high-quality services to the public
and acting as an effective tool for mobilizing financial capital for growth, in particular
through a supervisory mechanism In 1994, the Committee tabled its report. Some of the main
recommendations that this Committee made were as follows:
Establishment of an autonomous regulatory authority on the basis of the Indian Securities and
Exchange Board;-
- giving a green signal to the private sector to join the insurance industry;
-marketing of life insurance to comparatively vulnerable sections of society and a
particular share of company in rural areas;-welfare-oriented general insurance schemes;
-- The requirement for a specified proportion of the general market as a non-traditional
rural sector to be undertaken by new entrants;
-the technology-driven activity of the General Insurance Corporation of India (GICI); the
GIC to act solely as a reinsurer and to cease to be a holding company;
-the introduction of unlinked pension schemes by insurance companies; and - the
reorganization of insurance companies;
Although the report of the Malhotra Committee on insurance sector reforms was published in
1994, it was only in December 1999 that Parliament passed the Insurance Regulatory and
Development Authority (IRDA) Act and subsequently the Authority was established in the year
2000. India's model of reforms in the insurance sector with the establishment of a regulatory
authority and the subsequent regulations promulgated by IRDA has been well received around
the world and a great deal of appreciation has been expressed in global forums by industry
professionals.
The IRDA Act provides for the Authority's composition and for general rules regulating the
authority's operation and quality of services. The Act also provides for the creation of an
Insurance Advisory Committee; a fund for the Insurance Regulatory and Development Authority
and the Central Government's powers to make laws, issue directions to the Authority and, if
necessary, substitute them; and other miscellaneous provisions. It also includes three schedules
according to which the First Schedule mentioned several amendments to the 1938 Insurance Act.
The Second Schedule introduced s.30A into the 1956 Life Insurance Corporation Act, under
which LIC's exclusive right of carrying on life insurance business in India was revoked. The
Third Schedule introduced a similar clause, s.24A, in the 1972 General Insurance Company
(Nationalization) Act, whereby the GIC and its subsidiaries 'exclusive privilege in respect of the
general insurance sector ended.
IRDA has a responsibility to oversee, encourage and ensure that the insurance and reinsurance
industry grows orderly. Sec. 14, The IRDA's powers and duties shall include:
(a) registration / modification / cancelation of the registration of insurance undertakings;
(b) compliance with the provision of the company's capital structure as well as the
solvency margin; insurance undertakings in the rural and social sectors; submission of
returns / reports; approval and preparation of the amalgamation and transition scheme of
insurance undertakings;
(c) Licensing of insurance undertakings;
(g) Promotion and regulation of qualified insurance organizations;
(h) Regulation of the acquisition of funds by insurance companies; I investigation and
inspection of the affairs of insurers;
(j) Adjudication of disputes between insurers and insurance intermediaries;
(k) Supervisory functions of the Tariff Advisory Committee;
(l) Defense of the interests of policy holders;
In compliance with its powers under the IRDA Act, the IRDA has drawn up 27 sets of
Regulations on various topics such as the preparation and submission of actuarial reports,
insurance responsibilities for rural and social sectors, the registration of Indian insurance
companies, the preparation of financial statements and insurance auditors 'reports, the
type of annual accounts and records, insurance brochures. Such regulations are important
components of the Regulatory regime.
11. CONCLUSION
Choosing the best insurance policy is a crucial foreign trade activity. Every exporter wants the
broadest "All Risk Coverage" coverage at minimal expense, but the underwriters may agree to
provide only limited coverage of the risk. Thus it is a safe thumb rule for an exporting business
to ensure the correct form of coverage widely accepted in its trade. To make insurance best-use,
it is not just risk coverage that should be be analyzed by the underwriters; company quoting the
lowest cost, company that has a history of prompt settlement as stated in contract and insurance
companies that are specialized in specific commodities will always serve better. Marine
insurance is a portion that mitigates the risk associated with the property's money and risk-related
malaise. Be that as it may, in the conduct of the marine insurance sector, the manner in which
dissimilar national legal regimes exist hosts certain outcomes for contracting meetings,
particularly the guaranteed ones, which will experience problems in the field of understanding
outside the insurance industry. The universal conduct of marine safety, especially from the point
of view of the guarantees, will be seriously blocked without the continuity of the national marine
insurance legal regimes. Therefore, considering the global existence of maritime protection, there
is a need for the harmonization of the legal regimes that represent the interests and commitment
of the gatherings to defend the contract, including international transport and commerce.
12. BIBLIOGRAPHY
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