ABSTRACT
Introduction In international sales, goods are normally insured against the hazards they are likely to encounter during the voyage from the seller’s country to the buyer’s country. In the event of loss or damage to cargo due to perils of the voyage, the insured will be able, depending on the terms of the insurance policy, to recover his losses from the underwriter or insurer. In other words, under an insurance contract, the insurer undertakes to indemnify the insured (assured) against future losses/damage to goods caused by specifi c circumstances, such as fi re, earthquakes and theft. The question of what type of insurance needs to be obtained to cover the cargo – for example, marine insurance, air cargo insurance – depends on the mode of transport agreed on by the parties in the contract of sale. Where parties have concluded their contracts on cost, insurance and freight (CIF) and free on board (FOB) terms, 1 goods will be transported by sea and will, therefore, be covered by a marine insurance contract. The question of who is responsible for affecting the insurance is dependent on the contract terms. A CIF contract requires the seller, at his expense, to obtain insurance cover for the voyage and tender the policy to the buyer (or the advising/confi rming bank where the parties have agreed on a letter of credit arrangement), 2 along with the bill of lading. In an FOB contract, there is no legal requirement to obtain insurance cover on the part of the buyer or the seller. The buyer, however, would be well advised to obtain insurance if he wishes to cover himself against losses or damage while the goods are on the high seas. It is not unusual for a buyer in an FOB contract to request the seller to arrange insurance on the understanding that the buyer will reimburse the costs incurred. Such contracts are known as FOB with additional services contracts. 3
Insurance of goods during their transit from the exporting country to the importing country is an important incident in an international sale transaction. This chapter, therefore, focuses on cargo insurance, with the emphasis on marine insurance contracts, since much of the cargo is still transported by sea. The general principles applicable to marine insurance contracts, the circumstances in which risk does not attach, the undertakings (warranties) of the insured and the liabilities of the insurer in a marine insurance policy are topics for consideration. It must be noted that the principles applied to marine insurance contracts are relevant to other types of non-marine insurance contracts – that is, where the insurance contract covers carriage by other modes of transport, such as air or road. 4
Scope and nature of marine insurance contracts The law relating to marine insurance is contained in the Marine Insurance Act 1906. 5 A marine insurance contract, according to s 1 of the Marine Insurance Act (hereinafter ‘MIA’), ‘is a contract whereby the insurer undertakes to indemnify the assured, in a manner and to the extent agreed, against marine losses, that is to say, the losses incident to marine adventure’. There is a marine adventure, according to s 3(2), ‘where any ship, goods, or other movables are exposed to maritime perils’ – that is, ‘perils, consequent on or incidental to the navigation of the sea, that is to say, perils of the sea, fi re, war perils, pirates, rovers, thieves, captures, seizures, 6 restraints and detainments of
princes and peoples, jettison, barratry, and any other perils, either of the like kind or which may be designated by the policy’.
