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Marine Hull Insurance

Glimpses of the principles and practice of insuring Hull and Machinery of waterborne vessels

The purpose of this knol is to throw light on the principles and practice of Marine Hull Insurance, easily comprehensible to a layman looking for an overview of the subject.

Introduction

The term Hull refers to the body of a watercraft as the term Chassis to that of an automobile.  A watercraft is a vessel or craft designed to move across or through water for pleasure, recreation, physical exercise, commerce, transporting people and goods, and military missions. It is derived from the term "craft" which was used as term to describe all types of water going vessels including Ship[1], boat[2], canoes[3], kayaks[4], rafts[5], yacht[6], dhow[7], junks[8], coracle[9], catamarans[10], barges[11], hydrofoils[12] and jet skis[13]. 

Marine Hull Insurance implies insurance of the hull and machinery of a waterborne vessel or craft – by whatever name called or whatever purpose for which it is deployed.  This insurance generally covers the Hull, Motors or Machinery, Equipment and Accessories, Sails, Masts, Spars, Booms, Fittings, Spinnaker poles, Standing and Running Rigging, Trailer and Dinghy or Tender used with a commercial vessel which is capable of speeding up to 20 knots, while navigating or in transit within the navigational limits specified in the contract of insurance and the cover also extends while the vessel is at any Marina, Slipway or location when laid-up ashore.
 

Primarily, there are two types of Marine Insurance policies, namely, Time Policies and Voyage Policies.  Most of the Marine Hull Insurance Policies are Time Policies though Voyage Policies for Ships are also in vogue.  A policy may also be a mixture of these two. 

Laws governing Marine Insurance

Many countries have their own laws governing Marine Insurance. There is no international convention on the entire gamut of Marine Insurance yet.  The English Marine Insurance Act, 1906 defines Marine Insurance thus:  "A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure."  In India, the law governing Marine Insurance is Marine Insurance Act, 1963.  Thanks to contributions on the Internet, one can refer to provisions of the law of Marine Insurance by clicking here for the English law and here for the Indian legislation.  The Australian law can be referred by clicking here.  The Canadian law can be seen furnished here.
 
Thus, in brief, Marine Insurance covers maritime perils and certain other associated perils.  The term maritime perils refer to perils of the seas, that is, fortuitous accidents or casualties of the sea such as heavy weather, sinking, stranding, collision, etc. It does not include ordinary actions of the winds and waves.  The associated perils include fire or explosion, war, piracy, barratry, etc.
 

Scope of Cover

Originally, a common Policy format was used for insuring both the Ship and Cargo (called SG Policy Form).  Cover issued under this Policy Form was subjected to various Clauses attached thereto.  During the last century, there were several changes including the Policy form itself that was simplified and known as MAR Form, with Institute[14] Clauses attached to it.  The Institute Clauses, as applicable to Marine Hull, comprise of the Institute Time Clauses (Hull), 1.10.1983, the one originally introduced in the London market; a modified set of Institute Time Clauses (Hull), 1.11.1995 and a newer set of clauses called International Hull Clauses, 1.11.2003.

Perils Covered

A typical Marine Hull Insurance policy covers loss of or damage to the subject-matter insured (the Hull and Machinery of the vessel) caused by the following perils, namely:-
 
  • Perils of navigable waters including seas, rivers or lakes
  • Fire, explosion
  • Violent theft by persons from outside the vessel
  • Jettison
  • Piracy
  • Contact with land conveyance, dock or harbour equipment or installation
  • Contact with Aircraft, Helicopters or similar objects or objects falling from such aircraft, etc.
  • Earthquake, volcanic eruption or lightning
  • Accidents in loading, discharging or shifting cargo or fuel
  • Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull
  • Negligence of Master, Officers, Crew or Pilots
  • Negligence of Repairers or Charterers (only if they are not the Assured)
  • Barratry of Master, Officers or Crew
 
However, none of the last five perils above-listed should have resulted from want of due diligence by the Assured, Owners, Managers or Superintendents or any of their onshore management.

References

  1. Large vessels that are usually sea-going or ocean-going, used for transporting people or goods and depending on the purpose for which it is deployed, is termed as Tankers, Cruisers, etc.
  2. Boats are smaller vessels propelled on water by oars, sails or an engine, usually used for inland navigation and travel most often within costal waters. Boats may also be carried on board a Ship. Boats include lifeboats, dinghies, runabouts, etc.
  3. A light, open, slender boat that has pointed ends and is propelled by paddles
  4. An Inuit or Eskimo boat consisting of a light wooden frame covered with watertight skins except for a single or double opening in the centre, and propelled by a double-bladed paddle
  5. A flat structure typically made of planks, logs, or barrels that floats on water and is used for transport or as a platform for swimmers.
  6. Any of various relatively small sailing or motor-driven vessels, generally with smart graceful lines, used for pleasure cruises or racing
  7. Any of various lateen-rigged sailing vessels, typically having a raised poop, a raked stem, and one or two masts, used along the coasts of the Indian Ocean
  8. Junks are efficient and sturdy ships that were travelling across oceans as early as the 2nd century AD
  9. A small rounded boat made of waterproof material stretched over a wicker or wooden frame
  10. A boat with two parallel hulls or floats, especially a light sailboat with a mast mounted on a transverse frame joining the hulls
  11. A long, large, usually flat bottom boat for transporting freight that is generally unpowered and towed or pushed by other craft
  12. A wing like structure attached to the hull of a boat that raises all or part of the hull out of the water when the boat is moving forward, thus reducing drag
  13. A personal and recreational watercraft that the rider sits or stands on
  14. Clauses drafted by the Technical & Clauses Committee of the International Underwriting Association of London (formerly Institute of London Underwriters).

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Sreekrishnan Narayanan
Sreekrishnan Narayanan
Technology, Insurance, Reinsurance at Marsh & McLennan Companies
Dubai, United Arab Emirates
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