INSURANCE ASSIGNMENT

Q NO.2 .
Understanding the concept of insurable interest
Synopsis

 Introduction
 Definition of insurable interest
 Understanding insurable interest
 Working principle of insurable interest
o A typical requirement
 Need of insurable interest in an insurance contract
 Types of insurable interest
 Time or duration of insurable interest
 Who has an insurable interest
o But what about multi-owner properties
 Insurable interest and India
 Conclusion

Introduction
Due to the incidence and risk of expanded risks previously unknown to
life, trade, and commerce, the necessity for insurance coverage is
increasing today. Insurance is designed to protect a person against
unforeseeable events that may be harmful to him. It assures him that he
will not suffer any financial loss as a result of the occurrence of any
unanticipated calamity affecting his life or possessions. Insurance is a
contract in which one party guarantees to the other that he will not suffer
loss, damage, or prejudice as a result of the occurrence of hazards defined
to the particular objects that may be exposed to them in exchange for a
sum, also known as premium, given to him, adequate to the risk. There
must be some ambiguity as to whether the event will occur or not, or if
the event is one that must occur at some point, there must be a doubt as
to when it will occur.

Definition of insurable interest

The term “insurable interest” refers to a sort of investment that protects
against financial loss. When the damage or loss of an item, event, or
action will result in financial loss or other problem, a person or entity has
an insurable interest in it. A person or entity with an insurable interest
would purchase an insurance policy to cover the person, thing, or event in
the issue. If something occurs to the asset, such as it being destroyed or
lost, the insurance coverage would reduce the risk of losses.

Insurable interest is a condition for providing an insurance policy since it

makes the entity or event legitimate, valid, and protected against
malicious activities. People who are not at risk of losing money do not
have an insurable interest. As a result, a person or corporation cannot buy
insurance to protect themselves if they are not truly at risk of financial
loss.
Understanding insurable interest
Insurance is a kind of risk pooling that protects policyholders against
financial losses. Insurers have devised a variety of instruments to cover
losses resulting from a variety of reasons, including automotive
expenditures, health-care expenditures, lost income due to disability,
death, and property damage.
Insurable interest refers to persons or institutions with a reasonable
expectation of longevity or sustainability, assuming no unanticipated
negative occurrences. This individual or entity’s insurable interest protects
them against the possibility of a loss.
As an instance, homeowners and mortgage lenders both have an
insurable interest in their properties. You can’t insure anything if you don’t
have an insurable interest in it. Renters only have an insurable interest in
their belongings, not in the building they live in. If you own something or
would suffer financially if it was damaged or destroyed, you have an
insurable interest in it.

Working principle of insurable interest

In this context, insurable interest has nothing to do with earning interest
on a bank account or a fixed-income investment. Consider if you would
lose money if someone or something in your life died, or whether you
would lose money if a piece of property was destroyed. If you do, you may
have an insurable interest in that person’s, group’s, or thing’s survival.
And life and/or disability insurance, as well as property insurance, can
safeguard that interest.

A typical requirement
Before providing a policy, all life insurance firms need the potential owner
to demonstrate insurable interest.
Insurance contracts must include insurable interest to prevent people
from profiting from the loss of something to which they have no
connection. For example, if you see that your neighbour is a dangerous
driver, you will not be able to purchase automobile insurance for their
vehicle. You also can’t get life insurance for someone you don’t know.

Need of insurable interest in an insurance contract

It is not only essential for the insurance contract to be legitimate that the
parties be competent to contract, that it is done with free consent, and
that the transaction is legitimate, but it is also essential that the insured
has an insurable interest in the subject matter of the insurance. If there is
no insurable interest, the contract will be considered as a wager. Insurable
interest, in basic terms, indicates that the insured or the policyholder
must have a specific relationship with the subject matter of the insurance,
whether it be life or property insurance. In marine and life insurance, the
idea of insurable interest is particularly important.
The definition of insurable interest is evolving all the time. The most
generally mentioned definition of insurable interest is that of Lawrence J,
in Lucena v. Craufurd (1806), in which it was claimed that “A man is
interested in a thing to whom advantage may arise or prejudice may
happen, from the circumstances which may attend it…to be interested in
the preservation of a thing is to be so circumstanced with respect to it as
to have benefit from its existence, prejudice from its destruction”.
In general, a person has an insurable interest in anything if its loss or
damage would cause him or her to incur a financial loss or some other
form of harm. For example, if your automobile is involved in an accident,
you’ll either have to pay to fix it before you can drive it again, or you’ll
have to sell it for scrap and settle for a low price to replace it. Here, you
have a good motive to insure your automobile since you have suffered a
financial loss. If the event occurs while driving a car that you do not own,
you are not liable for any financial losses. You do not need to insure such
a vehicle. You are considered to have an insurable interest in the topic of
insurance if you have a “reason.”
The interest must be enforced, according to the guiding principle. The
mere prospect of obtaining it is insufficient. It has been claimed that a
party has an interest in an event if he stands to benefit if it occurs and
loses if it does not. However, the benefit or loss must be based on some
legal right, whether contractual, proprietary, legal, or equitable, that may
be enforced in a court of law. Although the insurable interest must be
legally enforceable, it is not the only condition, no matter how important it
is.
A husband who lives with his wife has an insurable interest in her property
because he is entitled by law to share her bliss in it, and she, no doubt,
has an insurable interest in his property because their rights and
responsibilities are substantially reciprocal. A shareholder, on the same
basis, has no insurable interest in the company’s assets. While the sole
shareholder in a one-man company will suffer some loss if the company’s
property is lost, he has no insurable interest in it even if he is in
possession of it, because his possession is not coupled with any legal right
to enjoy the use of property, and he is merely an unsecured creditor of the
company in his capacity as a creditor.
The mere possibility of harm is insufficient, and one cannot insure
something only because there is a potential of a secondary benefit if it is
not lost. A shareholder, on the other hand, can insure his ‘individual’
share, in which he has an insurable interest, against loss incurred as a
result of the company’s failure to complete an undertaking.
Thus, the assurance against the loss that he may incur as a result of an
accident to a third party may affect personal accident insurance. To make
such insurance legal, the assured must have an insurable interest in the
safety of the individual in question, and this interest must be monetary.
As a result, a son whose father is a pauper and reliant on him does not
have a sufficient insurable interest to justify a personal accident insurance
policy on his father.

Types of insurable interest

Insurable interest can be divided into two categories. There are two types
of insurable interest: contractual and statutory. Contractual insurable
interest refers to an insurable interest that is required by an insurance
contract in order to affect the policy, whereas statutory insurable interest
refers to an insurable interest that is prescribed by specific laws dealing
with insurance.
The term “insurable interest” is not defined in either the British Life
Assurance Act of 1774 or the Indian Insurance Act of 1938 . As seen in
certain circumstances, interest in the subject matter of insurance is
needed by law for the policy’s legality, whether by specific statutory law,
such as the Marine Insurance Act, 1906 of UK or by Section 30 of the
Indian Contract Act, 1872 which simply proclaims that all wagering
contracts are void. This is the statutory shareholder or the interest
required by law. If this agent is not present, the insurance is unlawful or
unenforceable, and no agreement between the parties may be successful
in removing this need. If the insurer does not raise the plea of interest in a
contract action, the court may decline to enforce the contract at its own
discretion.
Let’s look at a case law that explains the distinction between these two
types of insurable interests. In Macaura v. Northern Assurance
Company (1925), one Macaura insured the timber on his land against fire.
He sold timber to a business in which he held the sole substantial shares.
After the majority of the timber was destroyed by fire, he requested that
he be compensated. The insurer was able to avoid complying with the
requirement. The insured had no statutory interest in the firm’s assets,
despite the fact that he would suffer loss if the firm lost its property, nor
did he have any contractual interest under the policy because he couldn’t
show interest at the time of the loss. Despite the fact that the insured had
no statutory interest in the property, the policy was found to be not a
wagering contract since, as the only shareholder, he had an interest or, to
put it another way, an insurable interest in it.

Time or duration of insurable interest

The period during which the insurable interest must be present varies
depending on the kind of insurance contract. The question is whether
insurable interest should exist at the time of contract formation or should
it also exist until the contract is discharged; however, as we have seen in
life insurance, insurable interest is required at the time of policy formation
but not thereafter, not even at the time of risk occurrence. As a result, it
should be included in life insurance plans at the time of purchase. It is not
required to exist at the time of the loss or even when the claim is filed
under the policy. Contracts of life insurance are not strictly stating
indemnity contracts.
In the case of fire insurance, it is necessary both at the start of the
coverage and when the risk occurs. In certain ways, it may be claimed
that insurable interest is demanded twice in fire insurance. Because it is
considered as both a personal contract and an indemnity contract, the
insurance interest is required at all times. Even the onus of proving that
the fire was set on purpose is on the insurer, not the insured. The
presence of insurable interest is required only at the moment of the loss
in a maritime insurance contract.
Who has an insurable interest
The simplest explanation is that the property owner has an insurable
interest in it.

But what about multi-owner properties

In proportion to their ownership, they have an insurable interest in the
property. If two individuals both own 50% of a house, they each have an
insurable interest in 50% of the property.
However, insurable interest is a little more complex than simple
ownership. If you own a property and have a mortgage, you and your
lender are sharing an insurable interest. Although mortgage lenders do
not possess a physical share of the house, they do have a monetary
interest in it. Only if the homeowner is unable to make their mortgage
payments will the mortgage lender be able to take possession of the
property and sell it to recoup their losses. As a result, if the house burned
down, they’d be in a terrible situation. They would have no method of
collecting if the homeowner stopped paying and there was no house to
sell.
As a result, homeowners must always include their mortgage lender on
their homeowner’s insurance policy. As a result, the lender’s investment is
protected in some way. However, insurable interest is not limited to
homeowners; tenants also have an insurable interest in their property.
Renters, on the other hand, do not have an insurable interest in their
house. They don’t lose any money if the building they reside in is
damaged since it belongs to their landlord. There is one exception, if a
renter’s flat is destroyed, they will be responsible for additional fees for
temporary housing while their apartment is being rebuilt or while they
hunt for a new home. A renters insurance policy may be able to cover
these additional living expenses. However, this does not imply that the
property is in insurable interest.
Renters, on the other hand, only have an insurable interest in the contents
of their rented property, such as their furniture, clothes, and gadgets. As a
result, renters insurance plans do not cover the structure; the landlord
must have their own house insurance policy.
It is required for the person who is privy to the contract to have an
insurable interest in the life of the person for whom the policy is being
taken in order to effect a life insurance contract. Although it is difficult to
define precisely what constitutes an insurable interest in a life insurance
contract, it is a well-established legal concept that a life insurance
contract must have an insurable interest linked to it. Allowing someone
who has no interest in another person’s life to take out an insurance policy
in his or her name is against public policy. The Life Assurance Act of 1774
mandates insurable interest in England, whereas it is necessary as a
matter of public policy in America and India.

Insurable interest and India

There is no clause in India’s Insurance Act of 1938 that clarifies what
insurable interest is. In the lack of any formal explanation, courts look to
 English and American judgements that are consistent with the society’s
prevalent social, economic, and religious currents. Thus, in India, in
addition to a spouse, wife, or other inclose family, any individual having a
legal right to maintain a person can purchase a life insurance policy on
the latter’s life without proving insurable interest.
Relationships arising from contractual transactions are another type of tie
that gain insurable interest for the purpose of obtaining life insurance. As
a result, a creditor has an insurable interest in the debtor’s life to the
extent of his interest, and if the debt is guaranteed by a surety, the
guarantor’s life as well. In one of the cases in North Carolina, it was held
that “it was decided that a business partner has no insurable interest in
the life of the other partner except when the latter is personally owed to
him and only to the amount of that indebtedness”, in the case of Powell v.
Dewy (1998).

Conclusion
The world we live in is full of hazards and uncertainty. Individuals,
families, businesses, buildings, and investments are all vulnerable to
various dangers. These include the danger of losing one’s life, health,
possessions, and property, among other things. While it is not always
feasible to avoid unfavourable occurrences from occurring, the financial
industry has devised solutions that safeguard individuals and
organisations from such losses by providing financial resources to
compensate them. Insurance is a financial instrument that lowers or
eliminates the cost of a loss or the effect of a loss caused by various risks.
Provides financial security throughout one’s life. An insurance policy
relieves strain and worry brought on by unforeseen negative situations. It
makes a significant contribution to living a stress-free existence.
Q NO 3
All you need to know about insurance contract law
Synopsis:
 Introduction
 Definition of an insurance contract
 Formation of insurance contracts
o Agreement
o Lawful consideration
o Free consent
o Competency of the parties
o Lawful object
 Principles of insurance contracts
o Principle of Insurable Interest
o Principle of utmost good faith
o Principle of indemnity
o Principle of proximate cause
o Principle of subrogation
o Principle of loss minimization
o Principle of contribution
 Process of settlement of insurance claim
 Reasons for rejection of insurance claim
o Inadequate disclosure
o Delay in filing an insurance claim
o Delay in paying a premium
o Pre-existing condition
o Concealment of information
 Conclusion
 References

Introduction
Life is a chain of uncertain events that can never be predicted. One
moment we are very happy and balling around with our friends, and in
another, we may face the worst fears of our lives. Let me support my
statement with an example, suppose you’re going to a nightclub with your
friends, you’re very excited, and suddenly your car meets with an
accident. You’ll obviously get very dejected. This is what I meant when I
said life is unpredictable. This makes it necessary to take precautions
against suffering losses due to such occurrences. This is what the concept
of insurance is based on.

Definition of an insurance contract

An insurance contract is an agreement between the insurer, i.e., the
insurance company, and the insured, i.e., the policyholder, in which the
insurer agrees to compensate the insured for any future loss suffered by
him, and he does so by accepting a premium. In India, insurance contracts
are governed by the Insurance Act of 1938 and other rules and
regulations issued by the Insurance Regulatory and Development
Authority of India (IRDAI).

Formation of insurance contracts

As for the formation of contracts, the contract has to fulfil the criteria laid
down in Section 10 of the Indian Contract Act of 1872. In a similar way,
insurance contracts also have to meet the essential criteria mentioned in
Section 10 of the Indian Contract Act of 1872, which are as follows:

Agreement
An agreement is when one party makes an offer to another party and the
other party accepts that offer unconditionally, which forms the basis of
consideration for each other.
Agreement= offer+acceptance+consideration
In an insurance contract, when an offeror makes an offer to the insurer
that he desires to take an insurance policy from the insurer and is ready
to pay the premium, the insurer accepts that offer, and the acceptance of
the offer is communicated to the offeror. The insurance agreement is then
formed between the parties.

Lawful consideration
Section 2(d) of the ICA defines consideration. In an insurance contract, the
insured pays consideration to the insurer in the form of a premium for the
insurance, and the insurer pays consideration by indemnifying the
 insured. So from this, it can be concluded that the consideration should
come from each contracting party; though the form may be different.

Free consent
Section 13 of the ICA defines consent as when two or more persons agree
upon the same thing in the same sense, then it is said that they have
consented. Consent is said to be free consent when it is not caused by
coercion, fraud, mistake, or misrepresentation.

Competency of the parties

Section 11 of the ICA states that the parties who have attained majority,
i.e., 18 years, the person of sound mind who can understand the
consequences of entering into a contract, and the person who is not
disqualified by any law to enter into a contract, are said to be competent
persons to enter into a contract.

Lawful object
An agreement whose object is unlawful is void. Section 23 of the ICA
states that an object is lawful unless:
1. The law prohibits it;
2. It is fraudulent;
3. Invalidates any other law;
4. Causes injury to a person or property; or
5. It is contrary to public policy or is considered immoral.
The insurance contract should be for lawful objects and not for unlawful
objects. Let us understand this with an example: a person taking life
insurance for himself or his family members is lawful. Still, if he takes the
life insurance policy for an unknown person, then it will be invalid and the
insurance contract will be void as it will amount to gambling. Similarly,
insurance on the stolen property would also be void.

Principles of insurance contracts

The following are the fundamental principles of an insurance contract:

Principle of Insurable Interest

The individual must have an insurable interest in the subject matter on
which insurance is taken. In other words, the individual must have a
monetary gain from the subject matter or suffer a loss if the subject
matter is damaged or destroyed.
Illustration: A father can purchase health insurance for his son because
the father will suffer a loss if his son gets sick.

Principle of utmost good faith

The parties to the insurance contract must act in good faith with each
other, and the parties must not hide any facts that are related to the
insurance policy. The insured must disclose each fact that affects the risk
of the policy to the insurer, and the insurer must also explain the terms
and conditions of the insurance policy clearly to the insured.
Illustration: Rahul purchased health insurance. But while taking the
insurance policy, he didn’t disclose that he was a habitual drinker, and
later on, he got cancer. The insurance company will not be liable to
indemnify Rahul as Rahul didn’t act in good faith, and the policy can also
be cancelled.

Principle of indemnity
The main purpose of the principle of indemnity is to put the insured in the
same financial position as before the loss occurred. The insurer is liable to
pay the amount of loss suffered by the insured and not more than that
because the purpose of insurance is not to make a profit but only to
compensate for the loss that occurred. This principle does not apply to life
insurance contracts, as it is believed that a person’s life cannot be valued.
Illustration: Rahul purchased an insurance policy that covers accidental
damage to his car up to Rs. 1,00,000, and later on he met with an
accident and his car was damaged. The expense for repairing his car is Rs.
60,000; the insurance company will be liable to pay only Rs. 60,000 and
not Rs. 1,00,000.

Principle of proximate cause

Proximate cause is also known as the “Principle of Causa Proxima,” which
means the nearest cause. This principle will apply only if the loss is
caused by more than one reason. The insured will be liable to indemnify
the insured only if the nearest cause of the loss is insured.
Illustration: A ship was first punctured by rats, due to which sea water
entered the ship and the ship was damaged. In this case, the ship was
damaged for two reasons: firstly, rats punctured the ship, and secondly,
seawater entered the ship. In the insurance policy, risk due to seawater
was covered, and not for the first reason that the insurance company will
be liable to indemnify the insured as seawater is the nearest cause of the
ship’s damage.

Principle of subrogation
The term subrogation means substituting one person in place of another
for obtaining rights, claims, remedies, and securities.
This principle is applicable if the loss is caused by a third party.
In an insurance contract, if the insured incurs loss on the insured property
due to a mistake of the third party, then the insurer, after compensating
the insured for the loss incurred by him, gets the right to recover the loss
from the third party.
The principle of subrogation doesn’t apply in the case of a life insurance
contract.
Illustration: Rahul’s goods were carried from Mumbai to Delhi by XYZ
transport services, but due to the negligence of the driver, the goods got
damaged and incurred a loss of Rs. 5,000. The insurance company pays
Rs. 5,000 to Rahul. The insurance company can collect Rs. 5,000 from XYZ
transport services.

Principle of loss minimization

 The insured must take all necessary steps to minimise the loss of the
insured subject matter when it occurs. The insured must take all
precautions to avoid the loss, even after the subject matter is insured.
This principle doesn’t allow the insured to be negligent about the insured
subject matter.
Illustration: Rahul has an insurance policy on his car that also covers fire
damage. Later on, his car caught fire. At that time, Rahul cannot sit idle
and see his car burning; he must take the necessary steps to stop the fire.

Principle of contribution
There is a corollary relationship between the principle of contribution and
indemnity. This principle applies when the insured has taken out more
than one insurance policy on the same subject matter from different
insurers. According to this principle, the insured can claim compensation
only for the extent of the loss incurred, either from all the insurers or any
one insurer.
In the event that the insured claims full compensation from one insurer
and that insurer pays full compensation to the insured, then that insurer
can claim proportionate claims from other insurers.
Illustration: Rahul has a car worth Rs. 3,00,000. He took insurance from
Company ABC worth Rs. 3,00,000 and from Company XYZ worth Rs.
50,000.
Illustration 2: Rahul incurred a loss of Rs. 3,00,000 on the car. Rahul can
claim Rs. 3,00,000 from ABC, but after that, he can’t make a profit by
claiming compensation from Company XYZ. Now Company ABC can make
a claim from Company XYZ for proportional loss claim value.

Process of settlement of insurance claim

The general procedure for the settlement of an insurance claim with an

insurance company is as follows:
1. File a claim with your insurance company as soon as the loss occurs or
within the permissible time prescribed in the insurance policy.
2. The insurance company, after receiving your claim, may appoint a
surveyor to do an investigation and determine the loss or damage that
occurred to the insured property and the reason for the loss. the surveyor
shall be appointed within 72 hours of receipt of the information.
3. An insured must provide complete information to the surveyor; non-
cooperation may lead to a delay in the evaluation of a claim
4. After evaluating the claim, the surveyor has to submit a survey report to
the insurer.
5. Upon receiving the survey report, if the insurance company accepts the
claim, then the insurance company has to make an offer of settlement of
the claim within 30 days of the receipt of the survey report to the insured,
and if the insurance company rejects the claim, then they should inform
the insured within 30 days of the receipt of the survey report.
6. If the insured accepts the offer of settlement, then the insurer shall
reimburse the accepted amount within 7 days of receipt of the acceptance
of the offer.
Reasons for rejection of insurance claim
The following are the main reasons for the rejection of the insurance
claim:

Inadequate disclosure
It is the responsibility of the policyholder to provide accurate and correct
information to the insurer about the insured property or individual. One of
the important principles of an insurance contract is the utmost good faith.
Where an insured believes that the insurer will indemnify him in time of
need, whereas the insurer believes that all the information provided by
the insured is true and correct. If the insurer finds that the insured
withheld or misrepresented material information, he may reject the claim
that the insured generally doesn’t disclose material information to reduce
the premium. The lack of information includes the non-disclosure of past
medical conditions, previous accidents, or other relevant information.

Delay in filing an insurance claim

Unless the insured files the claim within the time limit specified in the
insurance contract, the insurer may reject the claim. A time limit is set to
file the insurance claim so that the insurer can properly investigate the
cause of the loss and come to an accurate conclusion about the loss.
In Om Prakash vs. Reliance General Insurance (2017), the Supreme Court
held that if there is reasonable ground for the delay in filing the claim,
then the delay can be excused.

Delay in paying a premium

One of the most common reasons for rejecting an insurance claim is a
delay in paying the premium. The insurer indemnifies the insured only for
the active policy. Imagine that the insured filed the claim when the policy
was inactive due to non-payment. In that case, an insurer may reject the
claim because the contract between the insurer and the insured was not
in force at the time of the claim and coverage was not provided during
that period. If you fail to pay the premium on the due date or within the
grace period provided, the insurer may consider your policy lapsed or
inactive.

Pre-existing condition
This is mostly applicable in cases of health or medical insurance.
According to this rule, a person must inform the insurer of any pre-
existing medical condition that he may be suffering from. Concealment of
such information may lead to the termination of the insurance, and it
would also amount to fraud.

Concealment of information
This is one of the most common grounds for rejecting claims. A person
who’s insuring himself or something else must give all the information
about such a thing or person to the insurance company and should not
conceal anything from them. Concealment or hiding of information may
lead to the rejection of the claim. In the case of Benarasi Debi vs. New
India Assurance Co. Ltd. (1959), the Patna High Court held
that “misstatement or suppression of material facts is in a sense
necessary in order to deprive him of the benefit that accrues in his favour
under the contract.”
Conclusion
It is important to carefully understand your insurance contract to ensure
proper coverage and avoid rejection of a claim. Taking time to review the
insurance contract helps you make smart choices and safeguard your
assets. Since these are standardised contracts, these policies are
commonly non-negotiable and people have a vast array of policies and
insurance providers to choose from that best suit their needs.

Q NO 4 eril of the Sea

Marine insurance has been defined as a contract between the insurer and insured in
which insurer agrees to pay an agreed amount to the insured against marine losses.
Marine insurance covers transportation of goods by ship, rail, road, air & couriers.
‘peril of the sea’ covers damages to ship during the voyage by the Acts of God.
It includes those accidents or casualties which do not happen due to the free will of a
human being. Even if we talk about natural perils, it will not include the natural and
ordinary action of wind.
Perils of the Sea refers to extraordinary forces of nature that maritime ventures
might encounter in the course of a voyage. The term ‘perils of the sea’ used in
marine policy do not include every casualty, which may occur to the subject matter of
the insurance on the sea. It means perils of the sea include those accidents or
casualties which do not happen due to the free will of a human being. Some
examples of these perils include stranding, sinking, collision, heavy wave action, and
high windsBroadly speaking, ‘peril of the sea’ is defined to cover everything that
happens to ship during the voyage by the Acts of God. To sum up, perils of the sea
mean everything which happens to the vessel during the voyage by the Act of God
without any intervention of a human.
Further, ‘perils of the sea’ in marine insurance comprise of losses only to goods
which are on board that happens due to some irresistible force or natural cause or
from the overwhelming power which is beyond the human skill and prudence. It
includes only the casualties that result from the violent action of the elements as
distinguished from the silent natural and gradual action of the elements upon the
vessel itself. Thus the insurer will be liable only if the loss or damage is the
proximate result of the fortuitous accident of the sea, e.g., the action of storm,
cyclone, and waves, etc. Here are some of the instances which are covered under
perils of the sea are-
 Foundering at Sea: If a ship is found to be missing for a duration of time and there is
no news about the missing ship, it would be considered as foundering at sea. Here,
the loss would be assumed as caused by the perils of the sea.
 Ship wreckage: In a case where the ship collides against a hill or rock and is driven
to the shore by the violent winds, it would be considered as a shipwreck.
 Stranding: In a situation where a ship got out of action after an accident and struck
up in a shallow region of sands, it would be called stranding.
 Collision: In a case, where the ship collides with another ship, it will be considered as
a collision.
OTHER PERILS INSURED IN A MARINE POLICY.
1. Perils of Sea
Under the perils of the sea, the ordinary action of the winds and waves, ordinary
wear and tear to the vessel, the inherent risk of the cargo is not included. The
underwriter may be liable for losses caused by Perils of the sea; he is not
necessarily liable for perils on the sea.
Perils of the sea refer to fortuitous accidents or casualties of the sea. Suppose the
loss arising out of any of the perils of the sea insured is attributable to the fraud or
willful misconduct of the assured. In that case, the underwriter is acquitted from the
liability under the policy.
2. Fire
In olden times fire was the biggest maritime peril, but recently it has been under
control to a greater extent. Damage resulting from fire and smoke is included under
fire-peril. The water used for extinguishing a fire may cause damage to the insured
goods. So, this peril is also insurable. The damage due to spontaneous combustion
may be maritime peril and be insured against.
Damage was done due to the lightning, explosion, and fire originating from the
negligence of the crew are recoverable from underwriters. The losses which are not
included in the standard policy can be covered by having special clauses and paying
an extra premium.
3. Man-of-War
This is the vessel that is authorized by nations for the purpose of defense or attack in
the event of hostilities. Any damage to the goods or ships arising out of collision
against a man-of-war is insurable.
4. Enemies
Tile ships belonging to the foe (enemy) may cause loss to the insured and is re-
underwritten by the marine policy. This policy extends to all the persons of the
enemy country and to their hostile acts provided such acts form part of the enemy’s
actions.
5. Pirates, Rovers, Thieves
 The perils on account of pirates, rovers, and thieves were common in olden times,
but they have been reduced considerably. These acts are generally committed to
pursuing individual gain by persons beyond the jurisdiction of a state. The ter’
‘thiev’s’ does not mean clandestine theft or theft committed by any crew, officers, or
passengers.
6. Jettison
Jettison means voluntary throwing away of the cargo or part of vevessel’s equipment
for lightning or relieving the ship for the common safety.
 The aim of intentionally throwing away the goods or property is to relieve the vessel
from some imminent peril.
 The accidental falling of things does not constitute a jettison.
 Own inherent-vice of cargo is also not included in the jettison.
7. Barratry
Barratry includes every wrongful act willfully committed by the master or crew the
prejudice of the owner. The act of barratry must be committed without the knowledge
of the owner.
The theft, then setting fire to ship, fraudulent selling of vessel and cargo without the
connivance of the ship-owner are the various examples of the barratry. The insurer,
if barratry insured, is liable for losses arising out of barratry.
8. Restraints and Detainments
The preventions free use of a port by the government of the country is called
restraints. It may cause interruption and possible loss of voyages involving such
ports and sacrifice of cargo.
The te’m ‘detainme’ts’ covers losses resulting from the detention of a vessel and its
cargo by blockage or possibly quarantine regulation or other interference by the
police power of a nation while a vessel is in port. It does not cover losses that result
merely from delay or interruption of the voyage, or loss of market or some other
remote result.
9. The Free of Capture and Seizure Clause (F.C. & S. Clause)
The policy generally covers war perils. But, to include the perils of the sudden
declaration of war, the war clause or free of capture and seizure clause is added to
relieve war perils. By deletion of this clause, the policy is automatically restored to its
original condition and adequate premiums are charged for the purpose.
10. Explosion
The risk of the explosion has greatly increased. The explosion on board a vessel
damaging hull or cargo or both could be constructed as peril on the sea, and an
explosion onshore might damage a ship or its cargo.
Marine cargo policies were amended to include the risk of explosions not clearly
caused by war perils. In case of hull policies, the explosion ‘on shipboard or
elsewhere’ is covered in the amended “Inchmaree or Negligence clause”.
11. Strikes, Riots, and Civil Commotion Clause
The marine insurance on cargo is extended to cover from warehouse to warehouse
or otherwise insures the goods on shore prior to shipment and after discharge; the
danger of underwriters being held liable for losses, resulting from the unlawful acts of
strikers from riots or civil commotions is materially enhanced. The insurers are
unwilling to assume liability for losses due to unlawful acts.
12. All Other Perils
The loss occurred by the saltwater of the sea, action of worms on timber, cattle dying
due to wanting of fodder as a result of lengthy voyage constitute sea perils. Other
damages may be due to oil, sweat, and heat, which are insured under other perils.
CONCLUSION
perils that are peculiar to the sea but are of such an extraordinary nature and power
that one cannot guard against them using ordinary skill and prudence the insurance
company denied that such waves in that region were perils of the [Link]
examples of these perils include stranding, sinking, collision, heavy wave action, and
high winds.