MARINE INSURANCE ACT 2002 UGANDA ELEMENTS OF MARINE

MARINE INSURANCE ACT 2002 UGANDA

ELEMENTS OF MARINE INSURANCE • • • Features of General Contract, Insurable Interest, Utmost Good Faith, The doctrine of Indemnity, Subrogation, Warranties, Proximate cause, Assignment and nomination of the policy, and Return of premium.

WHAT IS A MARINE INSURANCE CONTRACT? • Marine Insurance is a contract between an insurance company and the insurer whereby the insurer agrees to indemnify the insured in a manner, thereby agreed against the marine losses' incidental to marine adventure. Section 3(1) Marine Insurance Act 2002 • Marine insurance is vital in case of import and export of goods which is an essential part of the economy. By reimbursing against the loss of goods and ship, the policy helps exporters and importers endure any losses sustained thru transit

Prudential Insurance Co. vs. Inland Revenue Commissioner [1904]2 KB 658 per Channel J • A contract of insurance is one whereby one party (insurer) promises in return for money compensation (the premium) to pay the other (insured) a sum of money or provide him with a corresponding benefit upon the occurrence of one or more specific events.

MARINE INSURANCE HAS TWO BRANCHES • (i) Ocean Marine Insurance: Ocean marine insurance covers the perils of the sea • (ii) Inland Marine Insurance: Inland marine insurance is related to the inland risks on the land. Marine insurance is one of the oldest forms of insurance.

TERMINOLOGIES The insured (assured, policyholder), The insurer (underwriter, assurer, insurance company), The subject-matter insured, Marine adventure: one where any ship, goods or other movables are exposed to maritime perils; the earning or acquisition of any freight etc. • Marine perils; • •

SUBJECT MATTER OF MARINE INSURANCE • Marine Insurance may cover; • Cargo: The person who is importing the goods and the person who is sending them are interested in the safety of goods during the sea journey. The goods to be insured are called ‘cargo’. Any loss of goods during journey is indemnified by the insurance company • Hull Insurance: When the ship is insured against any type of danger it is called Hull Insurance. The ship may be insured for a trip or for a period.

SUBJECT MATTER CONT’D • Freight Insurance: The shipping company has an interest in freight. The freight may be paid in advance or on the arrival of goods. The shipping company will not get freight if the goods are lost during transit. The shipping company may ensure the freight to be received which is known as freight insurance.

SUBJECT - MARINE ADVENTURE MEANS • Section 4 (1) Subject to this Act, every lawful marine adventure may be the subject of a contract of marine insurance. • (2) In particular, there is a marine adventure where— (a) any insurable property is exposed to maritime perils; (b) the earning or acquisition of any freight, passage money, commission, profit or other pecuniary benefit, or the security for any advances, loan disbursements, is endangered by the exposure of insurable property to maritime perils; or (b) any liability to a third party may be incurred by the owner of, or the other person interested in or responsible for, insurable property, by reason of maritime perils.

WHAT ARE MARITIME PERILS? • Means the perils consequent on or incidental to the navigation of the sea and inland waters, namely, perils of the seas and inland waters, fire, war, pirates, rovers, thieves, captures, seizures, restraints and detainment of foreign governments and peoples, jettisons and barratry, and any other perils of the like kind or which may be designated by the policy and perils of land incidental to sea voyage; • Section 2 of the Marine Insurance Act 2002

MARINE PERILS CONT’D • Perils of the seas = fortuitous accidents or casualties of the sea (heavy weather, sinking, stranding, collision, contact), not including the ordinary actions of the winds and waves. • (2) Fire, war perils, pirates, rovers, thieves, barratry etc. The Captain Panagos DP [1985] 1 Lloyd's Rep. 625. The element of fortuity is of crucial importance.

WHEN IS A MARINE INSURANCE CONTRACT CONCLUDED? • A contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer. Upon the conclusion of the contract, the assured is entitled to require the issue of the policy based on the contract. Section 21 (1) & (2) Marine Insurance Act 2002 • A contract of marine insurance is inadmissible in evidence unless it is embodied in a policy in accordance with the Marine Insurance Act. The policy may be executed and issued either at the time when the contract is concluded, or afterwards. Section 22(1) & (2)

CONTENT OF THE MARINE INSURANCE POLICY • The Insurance policy should contain (a) the name of the assured, or of some person who effects the insurance on his or her behalf; • (b) the subject-matter insured, and the risk insured against; • (c) the voyage, or period, or both covered by the insurance; • (d) the sum or sums insured; and • (e) the name or names of the insurers. • Section 23 of the Marine Insurance Act 2002

CONTENT OF MARINE POLICY CONT’D • Marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient. Where a policy is subscribed by or on behalf of two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the insured. • Section 24 Marine Insurance Act • The subject-matter insured must be designated in a policy with reasonable certainty. Section 26 Marine Insurance Act 2002

TYPES OF POLICIES • • • Voyage Policy, Timely Policy, Valued Policy, Unvalued Policy, Floating Policy

VOYAGE POLICY • “from” or “at and from” one place to another • From: Where the subject-matter is insured “from” a particular place, the risk does not attach until the ship starts on the voyage insured. • Where a ship is insured “at and from” a particular place, and she is at that place in good safety when the contract is concluded, the risk attaches immediately.

VOYAGE CONT’D • There is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure is not so commenced the insurer may avoid the contract. Section 42(1) Marine Insurance Act 2002 • However, in respect to the aforesaid, the insurer may not avoid the contract if the delay was caused by circumstances known to the insurer before the contract was concluded or showing that he or she waived the condition. • Section 42(2)

VOYAGE POLICY • Alteration of port of departure: the risk does not attach to the insurer. Section 43 Marine Insurance Act 2002 • Sailing for different destinations: the risk does not attach. Section 44 Marine Insurance Act 2002 • Change of voyage: the insurer is discharged from liability as from the time of change. Manifest intention to change the voyage is sufficient. Section 45 Marine Insurance Act 2002 • There must be a voluntary change of destination. See Rikkards v. Forrestal (1942) AC 50.

VOYAGE POLICY • Deviation: the insurer is discharged from liability as from the time of deviation (non-contractual route). Section 46 Marine Insurance Act 2002 • Several ports of discharge: proceed in the order designated by the policy. If not = deviation. Section 47 Marine Insurance Act 2002 • Delay: the adventure must be prosecuted with reasonable despatch. Section 48 Marine Insurance Act 2002

VOYAGE POLICY CONT’D • Excuses for deviation or delay: authorisation (“held covered” provisions), safety of the ship, saving human life, beyond master’s control, complying with an express or implied warranty, obtaing medical or surgical aid for a member of the crew, barratrious conduct of the master or crew etc. Section 49 MIA • “barratry” means an act committed by a master or mariners of a vessel for some fraudulent or unlawful purpose contrary to their duty to the owner and resulting in injury to the owner; section 2 • Where the cause of delay or deviation ceases, the ship must resume her course and prosecute the voyage with reasonable dispatch

TIMELY POLICY • Time policy: for a definite period of time; a policy may be a “mixed” time and voyage policy. A specific date for the commencement and termination of the risk must be stated in the policy. • Extension or cancellation clause: a policy for a period of time does not cease to be a time policy merely because the period of time may be extended or abridged pursuant to one of the policy’s contractual provisions. The Eurysthenes [1977] 1 QB 49 (CA).

TIMELY POLICY CONT’D • • The continuation or ‘held covered’ clause: the vessel is only held covered if, at the expiry of the policy, the vessel is (1) at sea and in distress or missing; or (2) in port and in distress

VALUED POLICY • it specifies the agreed value of the subject matter, which is conclusive in the absence of fraud. Valued policies are almost universal in marine insurance. • Section 27 Marine Insurance Act 2002 • Irving v. Manning (1847) 1 HL Cas 287. • However, the value must not go beyond what is “reasonable and fair”, and the insured is meant only to have an “indemnity”, the very basis of a contract of insurance. What constitutes excessive over-valuation is a question of fact.

UNVALUED POLICY • Unvalued policy: it leaves the insurable value to be subsequently ascertained. Section 28 Marine Insurance Act 2002 • Insurance on ship, freight and any other subject matter other than cargo: the insurable value is the value at the inception of the risk; • Insurance of goods or merchandise: “prime cost” (price paid by the insured, e. g. CIF).

Rules that govern the Interpretation of policies • National Insurance Corporation ltd vs. Kakugu Sylvan Civil Appeal No. 040 of 2015 [2016] ( arising out of suit no. 106 of 2014). • 1) the words must be given their ordinary meaning and proper sense known as the literal rule of misrepresentation, • 2) when general words are linked with more particular ords, those words must be construed as limited to the meaning similar to the one particular words known as the ejus dem generis rule. • 3) the policy must also be interpreted as a whole,

Rules that govern the Interpretation of policies National Insurance Corporation ltd vs. Kakugu Sylvan • 4) terms of art or technical meaning must be understood in their proper sense unless the context controls or alters their meaning, • 5) where the wording of the policy is ambiguous, it must be construed strictly against the person seeking to rely on it.

WARRANTIES IN MARINE INSURANCE • Warranties / Contractual Terms in Marine Insurance : these are terms that define the risk and exclusions from risk. • Nature of a Warranty: Means a promissory warranty, namely, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or by which he or she affirms or negatives the existence of a particular state of facts.

Warranty Cont’d • A warranty may be express or implied. Section 33(2) • A Warranty is a condition. It must be strictly and exactly complied with. Upon breach, even if non-causative or immaterial, the insurer may repudiate the contract as from the date of the breach of the contract. Section 33(3)MIA 2002 • When is breach of a Warranty excused? Non-compliance with a warranty is excused when, by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, or when compliance with the warranty is rendered unlawful by any subsequent law. Section 24(1) MIA 2002

Express Warranty • An express warranty may be in any form of words from which the intention to warrant is to be inferred. It must be included in. or written upon, the policy, or must be contained in some document incorporated by reference in the policy. • An express warranty does not exclude an implied warranty, unless it is inconsistent with it. Section 35 MIA 2002

Implied Warranties Set out in the MIA • The adventure will begin within a reasonable time, • The adventure is lawful and so far as it is within the control of the assured section 41 MIA 2002, • Regarding voyage policies, implied warranty that the ship is seaworthy at the commencement and purpose of the voyage/ journey. Section 39(1) MIA 2002

Implied Warranties Cont'd • That the ship is reasonably fit to carry the goods to their destination section 40(2)MIA 2002 • That the ship is reasonably fit to encounter ordinary perils of the sea. Section 39(4) • Nonetheless section 87 gives the parties to the contract of marine insurance to negate any right, duty or liability that may arise out of usage. Although they cannot prevent the principles of the doctrine of illegality. • No implied warranty that goods are seaworthy

Implied Warranties Cont’d • Where a voyage is performed in different stages, there is an implied warranty that at each stage, the ship will be seaworthy with regard to the preparation or shipment. Section 39(3) • In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but, where with the privity of the assured the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness. Section 39(5)

Warranty of Seaworthiness of Ship • In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured. • In a time policy, however, there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the insured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness. If the shipowner deliberately refrains from examining the ship in order not to gain direct knowledge of what he has reason to believe is her unseaworthy state, he is privy to the ship putting to sea in that unseaworthy state (the “blind eye” knowledge)

Avoidance of A Contract of Marine Insurance • Conditions precedent section 42 -48 if not met result into the avoidance of a contract of marine insurance.

ASSIGNMENT OF POLICY • Marine policies, unlike other policies of indemnity, are assignable unless there are express terms to the contrary. They can be assigned before or after the loss, by endorsement or in some other customary manner. Section 50(1) MIA 2002 • If the assignor loses insurable interest, the policy lapses and there is nothing to assign. Section 51(1)MIA 2002 • In the converse case, where the insured assigns the policy without assigning the subject-matter, the assignee has no insurable interest and is thus unable to sue on the policy

EFFECT OF ASSIGNMENT • where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name (e. g. in a typical case of cargo claim). The defendant (the insurer) is entitled to make any defense arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected. • Section 50(2)MIA 2002 • Lloyd v. Fleming (1872) L. R. 7 Q. B. 299.

THE PREMIUM

WHAT IS PREMIUM? • A premium is the amount of money an individudal or a company pays for an insurance policy. • It represents a liability, as the insurer must provide coverage for claims being made against the policy.

Payment of Premium • Unless otherwise agreed, the duty of the insured or his agent is to pay the premium, and the duty of the insurer to issue the Policy to the insured or his agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium section 52 -54 MIA 2002 • If there are no arrangements for a premium, a reasonable premium is payable, e. g. by reference to the market rate for the degree of risk in question

PREMIUM CONT’D • If the Marine Insurance Policy is effected through a broker, the broker is directly responsible to the insurer for the premium. Section 53 MIA 2002, • Universal of Milan v. Merchants Marine Insurance [1897] 2 Q. B. 93. • Effect of receipt on policy: the broker's failure to settle obliges the underwriter to look to the broker or its liquidator, and not to the insured. Section 54 MIA 2002

RETURN OF PREMIUM • Enforcement of return –Section 82 MIA 2002, • Return by agreement -Section 83 MIA 2002, • Return for failure of consideration-Section 84 MIA 2002

PRINCIPLES OF MARINE INSURANCE

INSURABLE INTEREST Every person has an insurable interest who is interested in a marine adventure. Section 5 (1) MIA 2002, A person is interested in a marine adventure where he or she stands in any legal or equitable relation to the adventure or to any insurable property at risk in it, in consequence of which he or she may benefit by the safety or due arrival of the insurable property, or may be prejudiced by its loss, or by damage to it, or by the detention of it, or may incur liability in respect of it.

INSURABLE INTEREST CONT’D • The insured must show: (1) financial loss, (2) the loss was caused by the peril insured against, (3) the subject matter was covered by the policy, (4) insurable interest • When interest must attach: “at the time of the loss”. Exception: “lost or not lost” Section 6 MIA 2002

TYPES OF INTERESTS • Defeasible or contingent interest: it is insurable. In particular, where the buyer of the goods has insured them, he has an insurable interest notwithstanding that he might, at his election, have rejected the goods, or have treated them as at the seller’s risk, by reason of the latter’s delay in making delivery or otherwise. Section 7 MIA 2002 • “defeasible interest” means an insurable interest which ceases during the currency of the voyage; Section 2 MIA 2002 • “contingent interest” means an interest which depends for its effect upon an event which may or may not happen;

TYPES OF INTEREST CONT’D • Bottomry and respondentia: the lender has an insurable interest in respect of the loan. Section 10 MIA 2002 • Master's and seamen's wages: the master or any member of the crew of a ship has an insurable interest in respect of his wages. Section 11 MIA 2002 • Advanced freight: the person advancing the freight has an insurable interest (CIF). Section 12 MIA 2002 • Quantum of interest: the mortgagor, the mortgagee. Section 14 MIA 2002

TYPES OF INTEREST CONT’D • The assured has an insurable interest in the charges of any insurance which he or she may effect (CIF). Section 13 MIA 2002 • Partial interest: it is insurable. Section 8 MIA 2002 • Reinsurance: the insurer has an insurable interest in his risk and may reinsure in respect of it. Section 9 MIA 2002

Assignment of interest section 15 MIA 2002 • Transfer of interest from one to another is called assignment. • Where the assured assigns or otherwise parts with his or her interest in the subject-matter insured, he or she does not by that transfer, assignee his or her rights under the contract of insurance, unless there is an express or implied agreement with the assignee to that effect. Section 15 • Selling the property or subject matter does not mean an automatic transfer of the insurance policy.

UTMOST GOOD FAITH (uberrimae fidei) • The marine contract is based on utmost good faith on the part of both the parties. The burden of this principle is more on the insured than on the underwriter (insurance company). The insured should give full information about the subject to the insured. He should not withhold any information. If a party does not act in good faith, the other party is at liberty to cancel the contract. • Section 17 Marine Insurance Act • Carter v Boehm (1766) 3 Burr 1905

Aspect of the duty of good faith • 1) A positive duty to disclose material information and • 2) A duty not to make any material misrepresentation. • The central components of the duty of utmost good faith are to certify proper disclosure of all material circumstances and to avoid making misrepresentations about material facts, circumstances or beliefs. • In practice, good faith duties are significantly more onerous for the insured than the insurer which may require a review of the insurance Law.

Carter vs. Boehm (1766)3 Burr 1905 lord Mansfield • Insurance is a contract based upon speculation. The special facts upon which the contingent chance is to be computed, the mot commonly in the knowledge of the inured only, the underwriter trusts to his representation and proceeds upo the confidence that he doesnot keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. Good faith forbids either party from concealing what he previously knows to draw the other into a bargain from his ignorance of that fact and his believing the contrary

Carter vs. Boehm • If the true facts are concealed in any way, whether fraudulent or not, then the risk taken by the insurer may be different from the risk they intended to take in which the policy would be void. This was seen as a natural consequence of an imbalance of knowledge under which the insured (usually) has sole knowledge of the key information which should be form the basis for a risk assessment by the insurer.

Insurance is uberrimae fidei • The principle applier prior to the conclusion of the contract and during the contract. • Duty of utmost good faith continues to apply after the conclusion of the insurance contract. Manifest Shipping Co. Ltd. v. Uni-Polaris Insurance Co. Ltd. and La Réunion Européene (The Star Sea) [2001] 1 Lloyd’s Rep. 389 (HL)

Disclosure of information • The assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him or her; and, if the assured fails to make that disclosure, the insurer may avoid the contract.

What does Material Circumstance Mean? • A circumstance is material if it would influence the judgement of a prudent insurer in fixing the premium or determining whether he or she will take the risk. • Section 18 (2) Marine Insurance Act 2002,

Material Circumstance cont’d • Pan Atlantic Insurance Co. v. Pine Top Insurance Co. Ltd. [1995] 1 AC 501 (HL). Lord Mustill: A circumstance is material if it was one which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk. It is not necessary to show that the disclosure would have had a decisive or conclusive influence. A circumstance may be material even though a full and accurate disclosure of it would not in itself have had a decisive effect on a prudent underwriter’s decision whether to accept the risk and if so at what premium. The insurer must also show that he was in fact induced to enter the contract on the relevant terms (the “actual inducement test”). In other words, the proposer must disclose not only the facts which he actually knows but rather the facts which in the ordinary course of business he ought to have known (so called constructive knowledge).

Non-disclosure and Fraud • HIH Causality and General Insurance ltd vs. Chase Manhattan Bank [2003] UKHL Rix LJ stated • ‘I am conscious that in Carter vs. Boehm Lord Mansfield does seem to have considered that there was a difference between concealment which the duty of good faith prohibited and mere silence. As a result, non-disclourse in the insurance context in the early years was referred to as concealment and the doctrine has sometimes between viewed and explained as constructive fraud. ’ • Read Hajji Kavuma vs. First Insurance Company ltd (civil suit No. 442 of 2013)[2018]

Unfairness of the doctrine of good faith • National Insurance Corporation ltd vs. Kakugu Sylvan Civil Appeal No. 040 of 2015 ( arising out of suit no. 106 of 2014). The many unfair accepts of the current law are as follows; • A) the insured can be unware of their duty to volunteer information not specifically asked for by the insurer on the proposal form. • B) the law requires the insured to assess whether the information would be relevant to the assessment of the risk by a prudent underwriter.

Unfairness of the duty of good faith: National Insurance Corporation ltd vs. Kakugu Sylvan • C) the test of materiality which underlines the rules on disclouer and misrepresentation assesses the insured by reference to the professional knowledge of the insurer which is unfair. • D) the insured can till be in breach even if the error was reasonable in the circumstances, for example if a question was unclear or required specific technical knowledge which did not have. • E) the only remedy for breach of good faith duties is retrospective avoidance of the entire contract which is unfair.

Unfairness of the duty of good faith: National Insurance Corporation ltd vs. Kakugu Sylvan • The insurer is not required t show that the none-disclouser or misrepresentation had any causal link to the claim inorder to avoid the contract for eample, if the claim was submitted relating to flood damage, the insurer could avoid the whole contract if insured had failed to disclose that their alrm system was not functioning. • The intermediaries including brokers are generally treated as being agent of the insured. As such the insured is held responsible for any failings on their part. That is so even where in practice, the intermediary is most closely connected to the insurer.

PROXIMATE CAUSE • The insurer is liable for any loss proximately caused by a peril insured against, but, he or she is not otherwise liable for any loss which is not proximately caused by a peril insured against. • Section 55(1) MIA 2002, • Proximate cause is the initial act which sets off a natural and continuous sequence of events that produces loss. In the absence of the initial act which produces loss, no loss would have resulted. • Pawsey v. Scottish Union and National (1907).

Proximate Cause continued • The Leyland Case (1918) AC 350 (HL). The ship was insured against the perils of the sea by a policy containing a warranty against all consequences of hostilities. While voyaging to Le Havre, she was torpedoed by a German submarine 25 miles from port. She began to settle by the head, but helped by tugs got to Le Havre and was taken alongside a quay in the outer harbour. A gale caused her to bump against a quay and the harbour authorities, fearing that she would block the quay, ordered her to moor at a berth inside the outer breakwater.

The Leyland Case (1918) AC • She was there for two days, taking the ground at each ebb tide, but floating with the flood. At last her bulkheads gave way and she sank, becoming a total loss. In an action brought by the shipowners on the policy claiming to recover as for loss by perils of the sea, the House of Lords held that the grounding of the vessel was not a novus casus interveniens and that the torpedoing was the proximate cause of the loss and that consequently the underwriters were protected by the warranty against all consequences of hostilities.

The Leyland Case (1918) AC • The ‘proximate cause’ under the 1906 Act need not always be the event closest in time to the incident. The proximate cause is that which is proximate in efficiency.

Excluded loss-when the insurer will not be held accountable. • Any loss attributable to the wilful misconduct of the insured section 55 (2) (a). However, the insurer is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew. • Delay section 55 (2) (b), • Ordinary wear and tear section 55(2)( c). • Effect of transhipment section 59, the liability of the insurer continues

Burden of Proof • The assured/insured bears the burden of proof. The assured has to show that the loss or damage falls within a risk covered under the insurance but if it relies on the perils of the see, it must prove the cause of the loss or damage with some degree of particularity. • Rhesa Shipping Co. SA vs. Edmunds, the Popi M (1985) 2 ALLER 712, the house of lords placed the burden on the assured to prove not only that the loss was caused by the insured peril but that the insured peril did not operate in conjunction with other causative factors for which the assured was at risk.

Types of loss- Section 56 -63 MIA 2002 Total and Partial Loss • Total loss-section, 56(2), 57 (actual total loss and Constructive Loss) • Actual total loss: destruction of the subject matter, damage to the extent that the subject matter ceases to be a thing of the kind insured, section 57 • The assured being permanentally deprived of the subject matter. • Total Loss-missing ship section 58,

Constructive Loss • Constructive total loss: reasonable abandonment (as the total loss appears to be unavoidable); the occurrence of damage which renders the vessel beyond economic repair (section 60 and 61). • Abandonment: the insured must give notice; otherwise the loss can only be treated as a partial loss. • “abandonment” means the surrender, relinquishment, disclaimer, or cession of property or of rights or the voluntary relinquishment of all right, title, claim and possession, with the intention of not reclaiming it-section 2 MIA 2002,

Partial Loss • Particular average loss: it is a partial loss caused by a peril insured against. Particular charges are not included. Section 64 (1) • Particular charges are expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, and particular charges are not included in particular average. Sectin 64 (2)

General Average and Salvage Charges Salvage • salvage service is performed by a person who intervenes voluntarily. • Section 65 MIA 2002 General average Charges • Services performed by a person who is specially hired or employed by the shipowner, on a quantum meruit basis, to save the whole adventure from common danger. • Section 66 MIA 2002 • Aitchison v. Lohre (1879) 4 App Cas 755.

General Average Loss • A general average loss is a loss caused by or directly consequential on, a general average act, and it includes average expenditure as well as a general average sacrifice. • General average loss: it is caused by a general average act which is any extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purposes of preserving the property imperilled in the common adventure. Section 66(2) MIA 2002 • Birkley v. Presgrave (1801) 1 East 220.

CONTRACT OF INDEMINTY • Marine insurance is a contract of indemnity, that is, to compensate for the loss or damage in terms of the value of the insured goods. The amount insured as agreed between the insurer and the assured forms the basis of indemnity. • Lord Ellenborough mentioned in Brotherston v. Barber 1816) 5 M & S 418 at p. 425 stated “The great principle of the law of insurance is that it is a contract for indemnity. The underwriter does not stipulate, under any circumstances, to become the purchaser of the subject-matter insured; it is not supposed to be in his contemplation: he is to indemnify only. ”

MEASURE OF INDEMNITY • The measure of indemnity is the sum which the insured can recover in respect of a loss on a policy by which he is insured. Section 67 (1) MIA 2002, • Extent of liability of insurer for loss: • Valued policy: most policies are valued; the insured can recover to the full extent of the value fixed by the policy. • Unvalued policy: the insured can recover to the full extent of the insurable value. Section 67 (2)

Measure of indemnity continued • Total loss: • Unvalued policy = the measure of indemnity is the insurable value. • Valued policy = the measure of indemnity is the insurable value of the subject-matter insured, Section 68 MIA 2002,

Measure of indemnity (Partial Loss) • Partial loss of ship: the reasonable cost of the repairs less the customary deductions, but not exceeding the sum insured in respect of any casualty; the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage. • Section 69 MIA 2002 • Partial loss of freight: he measure of indemnity is such proportion of the sum fixed by the valued policy, or of the insurable value in the case of an unvalued policy, as the proportion of freight lost by the insured bears to the whole freight at the risk of the insured under the policy. • Section 70 MIA 2002

Partial loss of goods, merchandise • Valued Policy is totally lost; the measure of indemnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy. • Unvalued Policy is totally lost: the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss • Damaged at its destination: the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value.

Further reading • Apportionment of valuation, Section 73 MIA 2002 • General average contributions and salvage charges • Liabilities to third parties: the measure of indemnity is the amount paid or payable by the insured to the third party. Section 74 MIA 2002, • Particular average warranties: A warranty confines the insured to recovery for total losses only, subject to the ordinary rules concerning the recovery of general average losses and salvage charges. Section 76 MIA 2002,

Further reading • General average contributions and salvage charges; section 73 MIA 2002, • General provisions as to measure of indemnity; Section 75 MIA 2002 • Successive losses: the insurer is liable for such losses even though the total amount of successive losses may exceed the sum insured. Section 77 MIA 2002

Further reading • Suing and labouring (sue and labour) clause: it covers the charges properly and reasonably incurred in pursuance of the insured’s duty to minimize the loss. The sums payable under the clause are additional to the policy indemnity. Section 78 MIA 2002

PRINCIPLE OF SUBROGATION • Suffish International Food Processors (U) LTD and another vs. Egypt Air Corporation SCCA No. 15 of 2001, the Supreme Court noted that • ‘subrogation is the right of an insurer who has paid for a loss to receive the benefit of all the right and remedies for the insured against a third party (parties) which if satisfied, extinguish or diminish the ultimate loss sustained. • Section 79 MIA 2002

Total Payment either whole or part of the subject matter • The insurer becomes entitled to lake over the interest of the assured in whatever may remain of the subject-matter so paid for, • And the insurer is by that surrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.

Payment for Partial Loss • the insurer acquires no title to the subject-matter insured, or such part of it as may remain, • But the insurer is subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so tar as the assured has been indemnified, according to this Act, by that payment for the loss.

Foundation of the Principle/doctrine • The principle of subrogation is established on a binding and operative contract of indemnity. • According to the principle, the insurer is eligible only to those remedies, rights or other advantages which are available to the assured himself. • X-Tel Limited and Insurance Company of East Africa v. Security 2000 HCT -00 -CC-CS- 163 -2004, court noted that the insurer is subrogated to any claim of any character which the assured is entitled to bring in proceedings against a third party to diminish his loss.

Subrogation continued • The principle of subrogation is ever a hidden and intrinsic ingredient of the contract of indemnify but…it does not become operation or enforceable until actual payment be made to the insured. It derives its life from the original contract. • Subrogation is a consequence to the principle of indemnity. The purpose of the insurance is return the insured to the position it was before the loss sustained through indemnity. Castellain vs. Preston

Conditions subject to Subrogation • The Insurer must be liable for the loss: • The insurer must fully indemnify the insured: this right can only be exercised if the insurer has fully indemnified the insured to the extent of the policy. Page vs. Scottish Insurance (1929) 98 LJKB 308

RIGHT TO CONTRIBUTION/DOUBLE INURANCE • Where the assured is over-insured by double insurance, each insurer is bound, as between that insurer and the other insurers, to contribute rateably to the loss in proportion to the amount for which he or she is liable under his or her contract. Section 80(1) MIA 2002 • If any insurer pays more than his or her proportion of the loss, the insurer is entitled to maintain an action for contribution against the other insurer, and is entitled to the same remedies as a surety who has paid more than his or her proportion of the debt.

• The assured may, at his autonomous discretion, can proceed against any one or combination of insurers for the whole sum due, leaving any insurer who pays more than his rateable proportion of the loss to recover contribution from the other insurers” • The Gunford Case [1911] AC 529 (HL);

EFFECT OF UNDER INSURANCE • Where the assured is insured for an amount less than the insurable value or, in the case of a valued policy, for an amount less than the policy valuation, he or she is deemed to be his or her own insurer in respect of the uninsured balance. Section 82 MIA 2002