Lesson Fourteen

Marine Insurance (I)

Perils and Losses

Goods during transportation on sea and in the course of loading and unloading might meet various kinds of perils and the goods might suffer loss of one kind or another.

Kinds of Perils:

In marine insurance, perils are generally of two kinds:

1.       Perils of the Sea

(1)    Natural Calamities: such as vile weather, thunder and lightning, tidal wave, earthquake, floods, etc.

(2)    Fortuitous Accidents: such as ship stranded, striking upon the rocks, ship sinking, ship collision, colliding with iceberg or other objects, fire, explosion,etc.

2.       Extraneous Risks: such as theft, rain, shortage, leakage, breakage, dampness,etc. They may include special risks, such as war risks, strikes, non-delivery of cargo, refusal to receive cargo, etc.

The term “Perils of the Sea” does not include the ordinary action of the winds and waves.

Furthermore, such losses caused by natural deterioration or deficiency in the quality of the goods , are generally not accounted as perils in marine insurance.

Kinds of Losses:

Losses fall into two main classes: Total Loss and Partial Loss. Both are again subdivided.

1.            Total loss can either be Actual Total Loss where vessel or cargo are totally and irretrievably lost, or Constructive Total Loss in a case where the ship or the goods have been abandoned because the cost of salvage of recovery would have been ou t of proportion to the value.

2.           Partial loss means that the loss to the goods is only partial.

In case of partial loss a fine distinctions is drawn between Particular Average and General Average. In marine insurance Average has an entirely different meaning from its normal usage and it means loss or damage to the goods in the course of sea transportation due to natural calamities and accidents and extraneous risks.

If a particular cargo is damaged by any cause the damage is called particular average and the loss msut be borne by the owner of this individual consignment. If the owner estimates the possibility of this risk as very small he may think it unnecessary to insure against it and take out a policy Free of Particular Average(F.P.A) and thus obtain a slightly lower premium.

General average is of an entirely different character. It applies to a loss intentionally insurred in the general interest of the shipowner and the owners of the various cargoes. For example, a ship may have run aground and all efforts to refloat it have failed. In order to save the ship from breaking up the master may decide to jettison (i.e. to throw overboard) part of the cargo to lighten the ship. This loss is borne by all concerned in proportion. The same applies to additional expenses incurred in the comon interest, i.e. the cost of using a tug to tow`a damaged vessel into port; all parties have to contirbute in proportion to their interests. A merchant can, and usually, will insure against this liability.

Insurance Cover

According to the recent stipulations of the People’s Insurance Company of China, the following basic insurance cores are available in marine insurance:

Free of (from) Particular Average (F.P.A) Insurance:

The insurance company will be responsible to pay clams for total or constructive total losses suffered by the whole lot of cargoes during transportation due to such natural calamities as vile weather, thunder and lightning, tidal wave, earthquakes, and floods, or for total or partial losses due to the ship or carrier being on fire, stranded, sinking, colliding or meeting other fortuitous accidents.

The insurance company will also be responsible, when losses are incurred in the course of loading or unloading, for instance, when one or several whole parcels of the goods are dropped into the sea and are considered lost, or when general average is incurred, i.e. when losses or expenses are incurred in the common interest.

With Particular Average(W.P.A.) Insurance or With Average(W.A.) Insurance:

The cover under this insurance is more extensive. The insurer is liable also for the partial-losses of the insured goods due to the risks caused by natural calamites mentioned under F.P.A. insurance.

All Risks Insurance:

Among the three kinds of basic insurance,under an “All risks” policy the goods are insured against all risks, e.g. from natural calamities, fortuitous accidents at sea, or general extraneous risks, irrespective of percentage of loss, total or partial. A natural deterioration of perishable goods, delay, loss or damage caused by inherent vice or nature of the subject matter are not covered.

Insurance Covers of Additional Extra Risks:

Risks that are not covered under the basic insurance covers F.P.A. and W.P.A. mentioned above may be insured against under separate declarations by the insured. These risks may be general extra risks such as Theft, Pilferage & Non-Delivery Risks (T.P.N.D), Fresh and/or Rain Water Damage Risks, Shortage Risk, Inter-mixture & Contamination Risks, Leakage Risk, Clash & Breakage Risks, Taint of Odour Risk, Sweating & Heating Risks, Hood Damage Risk, Rust Risk, Breakage of Packing Risk. These risks are covered under All Risks insurance. Or they may be special extra risks such as Failure to Delivery Risk, Import Duty Risk, On Deck Rish, Rejection Risk, War Risk, etc.

The distinction between the clauses F.P.A. [free of (from) particular average] and W.A.(with average) or W.P.A.(with particular average) is of great practical significance. Policies embodying a clause of the former type can be obtained at a cheaper rate of premium than those embodying a W.A.(W.P.A.) clause, but do not  provide such comprehensive insurance cover as the latter. The exporter has to decide in each particular case whether F.P.A. terms are sufficient or a W.A.(W.P.A.) insurance is requied; he should, if in doubt, exercise his discretion in favour of a W.A.(W.P.A.) insurance notwithstanding the highter rates of premium. Where fragile or delicate goods are shipped, e.g. glassware or textiles, a W.A.(W.P.A.) policy is generally apposite even if the goods are expertly packed. When rough cargoes are shipped, e.g. sheet-iron or coal, an F.P.A. policy is sufficient.

Notes:

1.       perils of the sea       一般海上风险

2.       natural calamities     自然灾害

3.       fortuitous accidents        意外事故

4.       extraneous risks      外来风险

5.       total loss   全部损失

6.       actual total loss              实际损失

7.       constructive total loss     推定全损

8.       partial loss       部分损失

9.       general average       共同海损

10.   average    海损

11.   particular average    单独海损

12.   free from particular average    平安险

13.   insurance cover       保险范围

14.   with particular average    水渍险

15.   all risks insurance    一切险

16.   additional extra risks       附加险

17.   general extra risks   一般附加险

i.  theft,pilferage & non-delivery risks(T.P.N.D.)偷窃、提货不着险

ii. fresh and/or rain water damage risks淡水雨淋险

iii. shortage risk（risks of shortage）短量险

iv. intermixture and contamination risks混杂、污染险

v. leakage risk(risk of leakage)渗漏险

vi. clash and breakage risks碰损与破碎险

vii.taint of odour risk串味险

viii. sweating and heating risks受潮受热险

ix. hook damage risk钩损险

x.  rust risk锈损险

xi. breakage of packing risk包装破裂险

18.   special extra risks特殊附加险

failure to delivery risk交货不到险

import duty risk进口关税险

on deck risk舱面险

rejection risk拒收险

war risk罢工险

19.   basic risks基本险。包括平安险（free from particular average） or F.P.A., 水渍险（with particular average） or W.P.A. or W.P.A与一切险（all risks）.

20.   with average 简称W.A.指保险人对运输中货物因海上灾难及意外事故所造成的部分损失赔偿责任。同with particular average 水渍险，负责单独海损。

21.   comprehensive insurance综合保险。