Marine Insurance

It refers to the particular loss or damage which is caused to a cargo due to a particular peril. The loss is directly borne by the persons who are affected by the damage to the cargo. This means that in any situation, it is not possible to shift the burden of loss to other persons involved in the shipment.

In other words, the result of the particular average clause is that the loss falls on the owner of the particular ship who has incurred damages either due to an accident or otherwise.

According to the Marine Insurance Act, 1906, the particular average is a partial loss (i.e., any loss other than a total loss) which is caused due to an insured peril and which is not a general average loss.

It means that if some parts of the cargo get damaged due to sea water during the voyage, the loss will be considered as particular and hence it will be borne by persons who directly get affected due to damage to the said cargo.

The particular average loss with regard to cargo may happen due to a lowering of the value of the cargo due to some factors during the voyage. Also with regards to the ship (hull or machinery), the damages must be caused only to a part of the ship and there should not be the total loss of the ship.

How much amount will be paid by the insurance company in order to indemnify the policyholder for a particular average will depend on the amount of the marine insurance premium paid. Usually, the insurer is required to pay for the loss for which the premium has been paid by the policyholder. It is necessary to note that the amount that the insurance company has to pay is not dependent on the market price, which the goods might fetch when they reach the port of destination or arrival.

Case:1

It had been a smooth journey for the ship Tango which was sailing from India to Sri Lanka. However, after two days of sailing, the ship found itself caught in  bad weather and its propeller got damaged. To continue the voyage, the ship required some repair work as well.

The expenditure on the repairing work was borne by the shipowner. In this case, as the shipowner had a marine cargo insurance, the insurer settled or indemnified the claim on the basis of the diminished value of the property sustained due to losses or damages. As losses or damages were due to an insured peril, which was a natural calamity, in this case, the insurance company considered it as a particular average and settled the claim accordingly.

Case: 2

A certain ship was carrying a cargo worth Rs 1 crore when suddenly, due to mechanical issues, it started overheating. The captain immediately informed the ship owner who tried to find out all the possible ways to safeguard the goods. Finally, the cargo owner decided to sell the cargo at a lower value in the intermediate port before the cargo reached the destination port. The goods were sold at Rs 5 lakh, however, if they would have been sold in the market, the cargo owner would have realised Rs 9 lakh.

In this case, the cargo owner had to incur losses due to selling the goods urgently. The cargo-owner had a marine cargo insurance policy and he contacted the insurer who considered it as a particular damage and decided to settle the claim. As the cargo-owner had to sell goods suddenly, they incurred losses which were considered by the insurer as the part of the particular average loss, and therefore, the claim was settled accordingly.


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