Marine Insurance (IC-67) Practice Flashcards

Comprehensive vocabulary flashcards covering fundamental concepts, statutory rules, standard clauses, underwriting criteria, claim adjustments, and recovery procedures in Marine Cargo and Hull Insurance.

Contract of Affreightment

An agreement for the carriage of goods in transit where the transporter issues a document (such as a Bill of Lading, Airway Bill, Lorry Receipt, or Railway Receipt) confirming receipt of goods and assuring safe delivery at a named destination in consideration of freight.

Marine Hull Insurance

Insurance covering loss of or damage to the hull and machinery of ships, yachts, barges, tugs, and other floating equipment during maritime operations, including Builders' Risk insurance during construction.

Marine DSU (Delayed Start-Up)

Consequential loss insurance issued in conjunction with marine cargo policies for project cargo, compensating the assured for loss of profits and standing charges (such as interest) when transit loss extends the project completion date.

Protection & Indemnity (P & I) Club

A mutual marine insurance association of shipowners and charterers that provides collective self-insurance for third-party liabilities, crew injury, environmental pollution, wreck removal, and collision liabilities not covered under standard hull policies.

Calls

The payments or contributions made by member shipowners and charterers to a Protection & Indemnity (P & I) Club to fund mutual coverage, distinguishing them from traditional commercial premiums.

Uberrimae Fidei

The fundamental legal doctrine of utmost good faith governing insurance contracts, requiring both the assured and the insurer to disclose before contract conclusion every material circumstance known or deemed to be known.

Warranty (Marine Insurance)

A promissory condition under Sections 35 to 43 of the Marine Insurance Act, 1963, by which the assured promises that something shall or shall not be done, or that a certain state of affairs exists or does not exist, requiring literal compliance to avoid discharging insurer liability.

Implied Warranties under MIA

Unwritten conditions deemed present in a marine insurance policy: (1) seaworthiness of the vessel at the commencement of the voyage (in voyage policies), and (2) legality of the adventure.

Insurable Interest (Marine)

A legal or equitable relationship to a marine adventure such that the person benefits from the safety or due arrival of the insurable property, or is prejudiced by its loss, damage, detention, or attendant legal liability, which must be present at the time of loss.

"Lost or Not Lost" Provision

A marine contract provision (embodied in Clause 11.2 of the Institute Cargo Clauses) allowing the assured to recover for a loss occurring before the interest was acquired, provided the voyage had commenced, risk had passed to the assured, and the assured was not aware of the loss while the insurer was not.

Defeasible Interest

An insurable interest that terminates or ceases during the currency of a voyage or transit according to the terms of sale (such as INCOTERMS), giving rise to the assignment of the cargo policy.

Contingent Interest

An insurable interest that attaches during the currency of a voyage upon the occurrence of a contingency, such as when a buyer exercises the legal right to reject goods due to delay or non-conformance, causing the risk to revert to the seller.

Valued Policy

A policy that specifies the agreed value of the subject-matter insured (often $110\%$ of CIF value in cargo trade), which is conclusive between the insurer and assured in the absence of fraud.

Subrogation

The equitable right under Section 79 of the Marine Insurance Act, 1963, whereby an insurer, having indemnified a loss, steps into the position of the assured to acquire all rights and remedies against third parties up to the amount paid.

Letter of Subrogation

A document executed by the assured upon claim settlement formally authorising the insurer to institute recovery proceedings against carriers or third parties in the name of the assured and at the insurer's expense.

Abandonment

The complete surrender and transfer of all rights, titles, interests, property, and attendant liabilities of the damaged subject-matter to the insurer, which is compulsory when claiming a Constructive Total Loss.

Double Insurance (Contribution)

A condition occurring under Section 34(1) of the MIA, 1963, when two or more policies are effected by or on behalf of the assured on the same adventure and interest, and the total sums insured exceed the indemnity permitted by law.

Proximate Cause (Causa Proxima)

The active, efficient cause that sets in motion a train of events bringing about a loss without the intervention of any new, independent force started and working actively from an independent source.

Over-Dimensional Cargo (ODC)

Cargo that cannot fit into a standard 40-foot closed box container or road trailer, or cargo that requires specialised handling due to an off-balance centre of gravity or an irregular footprint.

Institute Classification Clause (CL 354)

A standard underwriting clause requiring insured cargo to be carried on mechanically self-propelled steel vessels classed with an IACS member or National Flag Society, subject to strict age limits ($<10$ years for bulk carriers, $<15$ years for other vessels, with established liner exceptions).

Contra Proferentem Rule

A legal rule of policy construction providing that if any ambiguity exists in the policy wording, the contract is construed against the insurer who drafted it and in favour of the assured.

Clause Paramount

A paramount contractual clause that overrides all other printed or conflicting policy provisions and can only be removed from the contract by physical deletion.

Institute Cargo Clauses (ICC-C)

The most restricted standard marine cargo cover providing named-peril protection primarily against major maritime perils (fire, explosion, stranding, sinking, capsizing, collision, General Average sacrifice, and jettison).

Institute Cargo Clauses (ICC-B)

An intermediate named-peril cargo cover protecting against all ICC-C risks plus earthquake, volcanic eruption, lightning, washing overboard, water ingress into holds/containers, and total loss of a package dropped during loading/unloading.

Institute Cargo Clauses (ICC-A)

The widest standard marine cargo insurance cover, written on an "all risks" (unnamed perils) basis with specified exclusions, and uniquely including coverage for piracy.

Waterborne Agreement

The historic underwriting principle underlying the Institute War Clauses (Cargo) restricting war risk protection strictly to the period when the subject-matter is waterborne on an overseas vessel, with limited transshipment exceptions.

Institute Replacement Clause

A clause (CL 372) limiting the insurer's liability for damaged machinery or multi-part manufactured goods strictly to the cost of repairing or replacing the damaged part(s), plus refitting labour, carriage, and duty, not exceeding the insured machine value.

Cutting Clause

A clause applied to items of length (such as pipes, cables, and tiles) stating that if a portion is damaged, it shall be severed, the remaining sound portion utilised, and the insurer will pay only for the damaged length plus the cost of cutting.

Pair and Set Clause

A clause specifying that in the event of loss or damage to an article forming part of a pair or set, the insurer pays only the proportionate value of that part without regard to any special value the item had as a complete unit.

Brands Clause

A clause providing that when branded or trademarked goods are damaged, all identifying logos, brands, and marks must be removed or defaced, or the goods transferred to plain packaging, before the salvage is disposed of.

Seller's Interest Insurance

A contingent cargo extension protecting an exporter who sells goods on FOB or CFR terms against physical loss or damage when the buyer repudiates the contract or fails to pay, subject to a warranty of secrecy.

Import Duty Insurance

A non-valued insurance on the increased value of imported cargo represented by customs duty paid or payable at destination, triggered only if the loss is admitted under the primary CIF marine policy and the loss occurs after duty becomes payable.

Increased Value Insurance

A non-valued commodity insurance taken before vessel arrival to cover the margin by which the destination market value exceeds the CIF and duty values, reimbursing up to $75\%$ of the actual market loss.

Concealed Damage Clause

A clause agreeing that loss or damage discovered on opening intact containers, cases, or packages within a stipulated number of days after arrival is deemed to have occurred during the insured transit unless proven otherwise.

Shut-out Clause

A clause extending cover on cargo shut out from an intended vessel while it waits on the wharf, quay, or pier or is transferred to another loading facility, provided prompt notice is given to the insurer.

Sales Turnover Policy (STOP)

A single marine open policy covering all domestic and international transits of an enterprise, wherein premium is computed for each specific transit leg but quoted and charged as a composite rate on overall audited sales turnover.

Stock Throughput Coverage Flow

A continuous supply-chain insurance structure covering raw materials and supplies from import or inland procurement, through processing/storage of finished goods, central warehousing, C&F storage, and onward distribution to stockists, dealers, distributors, or overseas export destinations.

Key Structural Components of a Ship

The major physical anatomical elements of an ocean-going vessel, including the Bow, Stern, Portside, Starboard Side, Rudder, Propeller, Keel, Engine Room, Accommodation, Superstructure, Bridge, Flying Bridge, Poop Deck, Funnel Deck, and Main Mast.

Gross Tonnage (GT)

A unitless index of a ship's overall internal volume calculated based on the moulded volume of all enclosed spaces under the 1969 International Convention on Tonnage Measurement of Ships.

Deadweight Tonnage (DWT)

The cargo-carrying capacity of a vessel expressed in metric tons, representing the weight required to submerge the ship to its legal load line mark.

Disbursements Insurance

An ancillary hull insurance covering a shipowner's out-of-pocket operating expenses to fit out and provision a vessel, restricted by warranty to a maximum of $25\%$ of the Hull and Machinery sum insured.

3/4ths Running Down Clause (RDC)

Clause 8 of the Institute Time Clauses - Hulls providing supplementary insurance covering $3/4\text{ths}$ of the shipowner's legal collision liability to third-party vessels and cargo, with the remaining $1/4\text{th}$ typically insured by a P & I Club.

Sistership Clause

A policy provision treating collision or salvage involving vessels belonging to the same owner or management as if the other vessel were under entirely separate ownership.

Actual Total Loss (ATL)

A total loss occurring when the insured subject-matter is completely destroyed, loses its species (ceasing to be a thing of the kind insured), is irretrievably deprived from the assured, or is on a vessel posted as missing.

Constructive Total Loss (CTL)

A commercial total loss where the property is not destroyed, but the cost of recovering, reconditioning, and forwarding it to destination would exceed its arrived value (or exceeds $80\%$ of the insured value under International Hull Clauses).

Particular Average

A partial loss of or damage to the subject-matter insured fortuitously caused by an insured peril, as distinguished from a voluntary General Average sacrifice.

Salvage Loss

A settlement method applied when damaged cargo is sold short of its destination at an intermediate port to avoid greater loss, under which the insurer pays the difference between the insured value and the net sale proceeds.

General Average Act

An extraordinary sacrifice or expenditure intentionally and reasonably made or incurred in a time of peril for the common safety of the property involved in a common maritime adventure, requiring the voyage to be preserved from total loss.

Amount Made Good

The allowance or sum credited to a party in General Average adjustment to reimburse them for a sacrifice of cargo or vessel property, which itself must contribute rateably to the common loss.

Sue and Labour Charges

Extraordinary expenses reasonably incurred by the assured, their servants, or agents short of destination to avert or minimise a loss recoverable under the policy, payable by insurers over and above any total loss claim.

Particular Charges

Expenses incurred under Section 64(2) of the MIA, 1963, by or on behalf of the assured for the preservation of the subject-matter insured, other than General Average and Salvage Charges.

Maritime Salvage

The remuneration or reward payable according to maritime law to third parties who, voluntarily and independently of contract, render successful material assistance to preserve imperilled maritime property at sea on a "No Cure - No Pay" basis.

Carriage of Goods by Sea Act, 1925 (COGSA)

Indian maritime legislation governing carrier liability for cargo lost or damaged during ocean transit, setting a statutory monetary limit of $666.67\text{ SDR}$ per package or unit, or $2\text{ SDR}$ per kg of gross weight, whichever is higher.

Documentary Collection

A trade finance payment method where the seller forwards export shipping documents through banks to the buyer, releasing them only against cash payment (D/P) or acceptance of a bill of exchange (D/A) without an independent bank payment guarantee.

Documentary Credit (Letter of Credit)

A definitive, legally binding undertaking issued by an issuing bank at the buyer's request in favour of the seller to honour conforming drafts and documents up to a stipulated sum within a specified period.

UCP 600

The Uniform Customs and Practice for Documentary Credits (2007 Revision, ICC Publication No. 600), an international body of rules governing the issuance, presentation, and examination of letters of credit across global trade.

Scuttling Fraud ("Rust Bucket" Fraud)

A maritime fraud where a vessel approaching the end of its economic life is deliberately sunk by or with the connivance of the shipowner to fraudulently collect insurance claims on the ship and non-existent cargo.

Barratry

Every wrongful, illegal, or fraudulent act wilfully committed by the master, officers, or crew to the prejudice of the shipowner or charterer, such as running away with the vessel or scuttling her.