What are the Excluded Losses in Marine Insurance?

Total Losses

Actual Total Loss

Occurs when insured cargo is irretrievably deprived of its value due to complete damage or loss. This includes the sinking of a ship, spoilage of perishable goods, or disappearance of a vessel.

Constructive Total Loss

Arises when the cost of saving or repairing the insured property exceeds its value after the loss. This can occur when the property is damaged but salvageable or when access to the property is hindered by excessive expenses.

Partial Losses

Particular Average Losses

Affects only one interest in the marine venture, resulting from damage caused by insured incidents. This includes cargo damaged by seawater due to hull leaks or mechanical failures damaging ship engines.

General Average Losses

Occur when loss or damage results from deliberate sacrifices or expenditures made for the safety of the ship or cargo. This includes dumping cargo to lighten a ship’s burden or hiring a tugboat for towing for an engine breakdown.

Excluded losses under marine insurance are the risks that are not encompassed by policy coverage, extending beyond vessel operations to include external influences.

These exclusions are essential for insured parties to understand as they influence risk assessment and policy selections. Here are the categories of exclusions under marine insurance policy :

General Exclusions

• General exclusions outline the marine losses that are deemed to be outside the scope of the marine insurance policy. The coverage may exclude the following losses:

• Losses from acts of terrorism, piracy, or civil unrest. This safeguards insurance providers from the high risk associated with such events. Excluding coverage for such incidents with heightened risk factors helps insurance providers mitigate potential financial liabilities and ensure the sustainability of their business operations.

• Losses resulting from intentional or criminal actions by the policyholder or their employees. This mitigates the insurer’s exposure to fraudulent claims and unlawful activities. It is a precautionary measure that helps mitigate the risk of financial loss and maintains the integrity of the insurance system by promoting adherence to ethical business practices.

• Losses attributable to wear and tear, gradual deterioration, or inherent vice of insured property. This protects insurance providers from liabilities arising from natural processes or inherent flaws. It is a precautionary measure that helps ensure that the insurance providers are not held responsible for the inevitable consequences of ageing or inherent characteristics of the insured assets.

• Losses arising from delays in transit shield insurance providers from liabilities stemming from delayed deliveries and associated damages. This exclusion helps limit coverage to actual physical loss or damage, helping insurance providers mitigate the risks of claims that result from delays. In turn, this maintains the focus on providing insurance for tangible risks during transportation.

• Losses such as loss of market or use of insured property and losses from seizure or destruction by government authorities, among others. This shields insurance providers from various forms of financial exposure. This exclusion helps limit the coverage to direct physical loss or damage, which helps insurance providers mitigate the risks of claims that result from economic factors or regulatory actions. In turn, this ensures the sustainability of their operations and risk management strategies.

Specific Exclusions

• In addition to general exclusions, marine cargo insurance may feature specific exclusions that are tailored to certain types of losses. Here are a few to name:

• Losses arising from the inherent nature of the transportation of goods, particularly that of perishable items. This shields the insurance providers from any liabilities associated with natural degradation or spoilage.

• This exclusion helps limit the coverage to tangible physical loss or damage, which helps the insurance providers avoid any potential claims arising from the inherent characteristics of goods. In turn, this ensures a more accurate assessment of risks and liabilities in marine insurance policies.

• Losses arising from improper packing or storage of goods. This protects insurance providers from any liabilities that may be associated with the inadequate handling practices of cargo.

• This exclusion places the responsibility of the policyholder for ensuring proper packing and storage which help the insurance providers mitigate the risk of claims arising from preventable damages during transit. In turn, this promotes adherence to industry-standard packaging and storage protocols to minimise potential losses.

• Losses arising from a vessel that is not fit for sea, including defects in the vessel or its equipment. This exclusion protects insurance providers from liabilities linked to unsafe maritime conditions.

• It places the responsibility of ensuring the vessel’s seaworthiness on the policyholder, which helps insurance providers mitigate the risks of claims that arise from preventable accidents or damages due to vessel defects. In turn, this promotes adherence to maritime safety standards to minimise potential losses.

• Losses arising from the fault or negligence of the policyholder or their employees. This exclusion shields insurance providers from liabilities arising from avoidable errors or lapses in judgement.

• This exclusion holds policyholders accountable for ensuring proper care and adherence to safety protocols, which helps insurance providers mitigate the risk of claims resulting from avoidable accidents or damages. In turn, this promotes responsible behaviour and risk management practices.

Marine insurance policy packages come with exclusions of different kinds of marine losses that are not covered by the policy. These exclusions have a significant influence on the policyholders, especially if they are unaware of the exclusion details. It is crucial for policyholders to review their policies and comprehend the excluded losses closely.

In the event of a loss excluded from the policy, the policyholder will not be eligible to make any claims for the loss. This could lead to substantial financial losses. For instance, if cargo is lost due to an inherent vice, which is a common exclusion in marine insurance policies, the policyholder will not be able to regain the value of the lost cargo.

Policyholders should also understand that exclusions can vary between various policies and insurance providers. Hence, it is crucial to thoroughly check the policy and grasp the details of the specific exclusions applicable. Moreover, policyholders should contemplate the decision to purchase supplementary coverage for excluded losses.

To conclude, understanding the nuances of excluded losses under marine insurance is essential for both the insurance provider as well as the policyholder. A cargo insurance policy serves as crucial financial shields in the trade industry. As potential policyholders, such plans play a vital role in safeguarding the goods as well as the vessels of the owners.

Investing in a trusted marine insurance policy ensures that the insured shipments are shielded from the beginning to the delivery. Moreover, it is now possible to compare marine cargo insurance plans. This provides potential policyholders with the ability to choose a marine insurance policy that fits their requirements. Furthermore, it also helps them gauge whether the need for any supplementary coverage for excluded losses is necessary.

Tata AIG’s affordable marine cargo insurance plans also include coverage against liabilities that may arise from damages to third-party property or injury to any crew members.

Is negotiation or modification of exclusions in a marine insurance policy possible?

Yes, excluded losses under marine insurance can be negotiated or modified to align with the potential policyholder’s preferences. However, this depends entirely on the insurance provider and the policy at hand.

What is the meaning of ‘unseaworthiness’?

Unseaworthiness of a vessel means that the vessel in question is unable to perform the intended voyage safely.

Is unseaworthiness an excluded loss?

Unseaworthiness can be considered an excluded loss if it directly causes damages or loss.

What influences the cost of marine insurance premiums?

The following factors influence the cost of marine insurance premiums:

Value of the cargo

Route and destination of the voyage

Vessel’s age and condition

The insurance provider’s risk assessment.

Are there requirements that a vessel must meet to qualify for marine insurance coverage?

Yes, vessels are required to meet specific safety and seaworthiness standards set by the insurance providers to qualify for marine insurance policy coverage.

What can be done to tailor a marine insurance package to cover excluded losses under standard marine insurance?

Excluded losses under marine insurance can be covered by purchasing additional supplementary coverage. Although this may increase the premium costs, its extensive coverage safeguards the insured goods throughout the voyage.