It is possible to divide marine losses under the following head-
Total Loss=
It can be further segmented into the below categories:
- Actual Total Loss- It happens when-
- Goods damages completely
- Goods damaged beyond repairing
- The policyholder is deprived of the insured subject
- The ship is missing, and there is no trace of it
In the case of Actual Total Loss, entitles the policyholder to get the full amount of loss. When the insured gets the compensation, the title of goods may also pass on to the insurance company. This means that if some amount recovers from the sale of damaged items. The same will go to the insurance company and not to the policyholder.
Case:
L.S Crockery was sending a consignment worth Rs 10 lakh to the Maldives. When the fire erupted in the ship due to overheating of the engine. Though extinguished the flame, the heat damaged the crockery, eventually reduced to pieces. As L.S Crockery had a marine insurance policy, it approached the insurer for the claim settlement who considered it as a case of total loss and settled the claim accordingly.
Constructive Total Loss=
It happens when due to certain reasons, when abandons the ship and it’s not commercially profitable to retrieve the ship. In this case, the ship does not completely damage, but it’s not practical to repair it and restore it to its original state. In such cases, where the cost of repairing a ship is more than its value, then abandoning the ship is usually advisable. Similarly, if there’s some cargo safe in the abandoned ship, it would be better to leave the cargo there if the cost to bring the cargo to the coast is more than the cargo’s cost itself.
Case:
MJ Ship, laden with merchandise belonging to German merchants for sale in the Maldives, was on a voyage when the war broke out between Germany and UK. Unfortunately, the ship was in UK waters when the war broke out. And therefore, the UK navy personnel took it into their custody and released their crew members but refused to release the goods. The crewmembers returned to Germany, and MJ Ship approached its marine insurance company for the claim settlement. The insurer appointed a surveyor who found out that expenses incurred in bringing the cargo to the coast were more than the actual cost of the cargo. The surveyor considered it as a case of constructive total loss and on the basis of the report, the insurer settled the claim accordingly.
Partial Loss=
Can divide it into the following:
- Particular Average Loss= It is a partial loss that is caused by an insured peril.
Case:
The ship was carrying a cargo of Rs 50 lakh when suddenly it started overheating due to some mechanical issues. The Captain informed the same to shipowner who tried to find out ways for curtailing the losses. In order to protect the goods. Then finally the cargo owner decided to sell a part of the cargo at a lower value in the immediate port much before the cargo reached the destination. Here, sold goods for Rs 4 lakh, however, if sold in the market, the cargo owner gets Rs 12 lakh. As the cargo owner incurred losses due to urgent selling, he approached its marine cargo insurance company who considered it as a case of particular average loss and decided to settle the claim accordingly.
Read more: Do Past Claims Cause Higher Premium in Marine Policy?
- General Average Loss= It is a loss that is caused voluntarily in order to avoid any impending danger.
Case:
LS Ship was on its way to Dubai when it started sinking due to overloading. At this point, the captain allowed them to throw some of the cargo out of the ship. In order to save the ship and the crew members from sinking. In this case, the marine insurance would cover if any losses happened as threw the items off in order to save the ship and human lives.
