Marine Insurance: Law and Practice




2.1 Anything in respect of which there is a risk of loss from maritime perils may be the subject of marine insurance. It will be recalled that there is a distinction between the subject matter of insurance and the subject matter of the contract of insurance, that every lawful marine adventure may be the subject of a contract of marine insurance, and that a contract of marine insurance may be extended to cover risks other than maritime perils in a narrow sense.1 However, even though a marine insurance contract may include risks arising inland, the contract must be substantially one relating to a marine adventure. Therefore, the subject matter of the insurance must be capable of exposure to maritime perils. 2.2 The Marine Insurance Act 1906, section 26(1) stipulates that “The subject matter insured must be designated in a marine policy with reasonable certainty”. But there is no express requirement, either statutory or at common law, that there can only be designation of subject matter which falls within recognised categories of “subjects of marine insurance”. What the Act does state is that it applies to losses incident to “marine adventure”, which expression includes, though is not limited to, exposure to “maritime perils”.2 Ships, and goods carried by ships, are most obviously exposed to maritime perils. But does it necessarily follow that anything that is involved in a marine adventure, or at least is exposed to maritime perils, can be a subject of marine insurance, or must it fall within recognised categories? The application of the law of salvage, which basically seeks to encourage and reward preservation from danger at sea,3 requires that there be a recognised “subject of salvage”.4 Thus, it has been held that an unmanned gas float, shaped like a ship or boat though intended not for navigation but to act as a beacon to assist other vessels in navigation, was not a subject of salvage.5 However, a floating dock that had been strengthened (albeit insufficiently) for sea towage has been treated as a proper subject of hull insurance,6 although an oil rig bought and under towage on a barge for conversion into a mobile offshore production unit was insured as cargo.7 2.3 Two issues, therefore, need to be considered, which will be considered together: what falls within the description of the recognised subjects of marine insurance; and whether there are limitations on what may be subjects of marine insurance, so that certain subjects will be insured, if at all, under policies that are not marine policies.

Ship or vessel

2.4 The Marine Insurance Act 1906 and the principal standard terms used in marine insurance contemplate two main subjects of marine insurance. One, which will be considered below, is insurance of goods or cargo.8 The second, which will be considered now, is insurance of ships and vessels. As will be seen shortly, the Act stipulates what may be encompassed within the term “ship”. What it does not attempt to do is to settle the preliminary issue of whether or not the object whose definition it seeks to amplify is in fact a ship in the first place. 2.5 For the purposes of the particular statute: the Merchant Shipping Act 1995, section 313(1) states that “‘ship’ includes every description of vessel9 used in navigation”; and, in the Senior Courts Act 1981,10 it is stated in section 24 that “‘ship’ includes any description of vessel used in navigation and (except in the definition of ‘port’ in section 22(2) and in subsection (2)(c) of this section) includes, subject to section 2(3) of the Hovercraft Act 1968, a hovercraft”. 2.6 The cases on the interpretation of “ship” and “vessel” under the Merchant Shipping legislation indicate broadly, and not exclusively, that “ship” and “vessel” include “whatever can be called a ship or a boat in popular language, and any vessel used in navigation which is not habitually propelled by oars, although used only in inland waters”.11 2.7 The use by the Marine Insurance Act 1906 of the word “ship” in relation to vessels which may be the subject matter of marine insurance does not purport to be restrictive either in the terminology which may be used or in what may be the subject matter of marine insurance. In practice, the word “vessel” is most commonly used. 2.8 Thus, there is space allotted in both the Lloyd’s Marine Policy and the IUA Companies Policy for insertion of the name of the “vessel” concerned. The Institute Cargo Clauses (A), (B) and (C) use the word “vessel” in most references to the means of transport involved except in the “Unseaworthiness and Unfitness Exclusion Clause”.12 In that clause, losses arising from unseaworthiness and unfitness of “vessel” or “craft” to which the assured is privy at the time of loading are not covered but the underwriters waive breaches of the implied warranties of unseaworthiness or unfitness of the “ship” to carry the subject matter insured to a destination to which the assured is not privy. The word “craft” is also frequently used alternatively to “vessel” but apparently to refer to craft used to carry cargo to and from vessels rather than in parenthesis to “vessels”.13 In the Institute hulls clauses, the word “vessel” is used throughout,14 except in the Perils clause15 and the Duty of Assured (Sue and Labour) clauses16—and, in the International Hull Clauses, in the Additional Perils clause17 and the Recoveries clause18—where reference is made to “the subject matter insured”. 2.9 The overwhelming number of cases concerned with the definition of “vessel” in marine insurance are concerned with the definition of an object with which the insured property has collided or with the meaning of “collision”.19 They therefore provide no direct assistance in ascertaining whether there are limitations on what may be subjects of marine insurance. The most germane of the “collision” cases is The Niobe,20 where the underwriters insured the ship Niobe “from the Clyde (in tow) to Cardiff and/or Penarth … And if the ship hereby insured shall come into collision with any other ship or vessel” the underwriters agreed to pay the assured a sum proportional to any amount they had to pay the other vessel. While the Niobe was being towed to Cardiff, her tug collided with and sank another vessel, which recovered damages from the tug and the Niobe. The House of Lords decided that the parties to the insurance contract had entered it on the basis of the general rule that a vessel and a tug towing her were to be regarded as “one ship”, the tow being liable for their navigation. Therefore, the underwriters were liable to indemnify the Niobe. The Earl of Selbourne said:21

“I should hold [the words to be construed] to extend to cases in which the injury was caused by the impact, not only to the hull of the ship insured, but of her boats or steam launch, even if those accessories were not (as in this case) insured as being, in effect, parts of the ship. I should also hold them to cover an indirect collision, through the impact of the ship insured upon another vessel or thing capable of doing damage, which might by such impact be driven against the ship suffering damage. I should take the same view, as against insurers in similar terms, of a tug towing one or more barges (in which case the barge owners would not be liable for a collision) if damage to any vessel were caused by the barge or barges being driven against it through the improper navigation of the tug, although there might have been no impact of the tug itself upon the injured vessel.”

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