Marine insurance dies not cover the loss or damage expected to occur under normal conditions because of the nature of the goods themselves – their ‘inherent vice’. An example of damage from inherent vice is deterioration of imperfectly cured skins or breakage of fragile glassware inadequately packed. Inherent vice is specially excluded from coverage in “All Risk” clauses and it is an implied exclusion in all insurance policies. So also damage caused by original packing is excluded no matter when the damage itself may occur insurance contracts may also exclude the following losses: leakage or hook loses on goods packed in bags, solidification of palm and coconut oil, unless heated storage is provided.
Another common exclusion is delay. This means that loss of market and damage or deterioration arising from delay in transit, are not covered. This clause is sometimes modified by endorsement with respect to damage arising from delay in order to fit the needs of an assured engaged on a special trade such as meat trade, but even then the delay usually must be the result of fortuitous named perils.
Ordinary unavoidable trade losses such as shrinkage and evaporation in bulk shipments or infestations (in the case of copra) are also not covered either by an actual statements in the policy or by implication. When shortage, breakage or leakage is specifically insured the intent to so cover is clear. In such cases, it is assumed that the underwriter will charge a rate adequate to more than cover the normal trade loss.
Also, certain perils such as Wars and Strikes, Riots and Civil Commotions are commonly excluded, but these perils can be and usually are reinstated by special endorsement or by separate policy for an additional premium.
The Dangerous Drugs Clause stipulates that losses connected with the shipment of opium and other dangerous drugs will not be paid for unless certain specified conditions are met.
Other risks which not covered are:
1. Loss, damage and costs attributable to the deliberate fault of the insured party
2. Loss, damage and expenses arising from the inadequacy or unsuitability of the packing of the insured articles.
3. Loss, damage or expenses arising from the insolvency of the owners, charterers or operators of the vessel.
4. Loss, damage or expenses arising from the use of an atomic or a nuclear weapon or any other similar type of reaction or radio activity.
n a contract of marine insurance it is implied (1) that the assured will exercise utmost good faith is disclosing to his underwriter all affects materials to the risks when applying for insurance, (2) that the generally accepted usages of trade applicable to the insured subject matter are followed and (3) that the assured not contribute to loss through willful fault or negligence. Another implied warranty is that venture is legal.
Fixation of Premium Rates:
The rates for marine insurance are not standardized and are generally determined by the experience of the risk and the judgment of the underwriter. The following factors usually considered for the fixation of rates:
1. Nature of the goods: The merchandise may be fragile, perishable, prone to pilferage or dangerous. In such cases, premium ill be higher.
2. Nature of packing: Unpacked cargo on a pallet is more likely to suffer from damages or other forms of loss than goods packed in specialized cases. The higher risk is reflected in higher premium.
3. Mode of transport: Insurance for air freight is less expensive than for sea transport
4. Origin, destination and routing: Premiums are naturally higher for voyages through areas of armed conflict as well as routes that include certain passageways such as Suez Canal.
5. Type of coverage: The premium varies with the type of coverage required by the insured.
Some other factors are:
6. Carriers used
7. Storage or transshipment en route, if any
8. Effect of trade losses, such as shrinkage normal loss in weight etc
9. Seasonal character of shipments
10. Value – as it affects packing susceptibility to pilferage etc
11. Assured’s experience as a foreign trader
12. Shipping and delivery practices
13. Attitude towards claims by assured or his consignees
14. Attitude towards third party recoveries
15. Salvage possibilities under the individual account