THE MARINE INSURANCE ACT, 1963

The Marine Insurance Act of 1963 is a legal framework that regulates maritime insurance contracts in India. The law defines the regulations for marine insurance policies, as well as their principles, guidelines, obligations and much more.

Furthermore, the Marine Insurance Act of 1963 defines and explains the term associated with marine insurance. It sets rules for marine insurance policy formation and defines the insured's and insurer's responsibilities and duties.

The act also helps with various other maritime intricacies, such as material information disclosure, insurable interest, claims settlements and warranties in marine insurance.

There are various salient features of the Marine Insurance Act 1963, some of which are listed below:

-Coverage for Physical Damage or Loss

Marine insurance covers damage or loss to cargo or goods during transportation. These losses and damages include theft, fire damage, accidental damage, natural disasters and much more.

-Different Modes of Transportation

Under marine insurance case law, the benefit or coverage of the policy applies to different modes of transportation, including air, sea, rail, road or even a combination of these. The marine insurance plan is adaptable to the unique needs of the cargo and selected transport method.

-Customisable Policy or Plan

Another salient feature of the Marine Insurance Act 1963 is that these plans are highly customisable based on the unique needs of businesses. Businesses' requirements may vary, so under the act, businesses can customise their plans based on their unique cargo requirements, routes and more.

-Global Coverage

Marine insurance offers global coverage for shipments that travel through different countries and across various international borders. This comprehensive coverage, from the point the goods leave the seller’s premises until they reach a buyer’s location, provides a sense of security for international trade.

-Valuation Methods

Another crucial feature of the Maritime Insurance Act is that it offers various valuation methods for determining the insured value of the shipment or cargo. Some of the common methods include cost plus freight, invoice value, market value, etc.

The Marine Insurance Act of 1963 in India is grounded in a number of core principles that govern the relationships between insurers and the insured. These principles reflect the nature of marine risks and insurance and ensure fairness, transparency and clarity in marine insurance contracts. Here are the key principles of the Marine Insurance Act of 1963:

-Principle of Contribution

One of the crucial principles under the Marine Insurance Act 1963 is the principle of contribution. As the name implies, this principle states that if the policyholder has multiple insurance plans for goods, the insurance provider will make the payment for losses proportionately.

For instance, Rahul has marine cargo insurance from two different insurance providers for goods worth ₹50 lakh. Then, in the case of damage or loss of goods, the two insurance providers will settle the claim proportionately.

-Principle of Subrogation

Another crucial principle under marine insurance plans is the right to subrogation, which helps insurance providers. The principle of subrogation is only applicable after the insurance provider makes a payment against a claim to the insured party.

It simply means that after the claim settlement, the insurance provider has the right to sue a third party who might be responsible for the loss or damages to insured goods.

-Principle of Insurable Interest

Under the Marine Insurance Act of 1963, the principle of 'insurable interest' is crucial. It means that the insured parties should have a stake in the cargo or goods they wish to insure.

This ensures that the policyholder will benefit if the goods arrive safely at the destination or will suffer losses if something happens to the goods. Without this 'insurable interest ', the policyholder will not be able to claim the insurance.

-Principle of Cause Proxima

Under this principle, when there is a series of damages or losses to the insured goods, policyholders need to consider the nearest or proximate cause of loss or damages. Deciding the proximate cause will help in making the claim settlement process easy for insured parties.

For instance, a vessel has been punctured by rats, which causes seawater to enter, further damaging the cargo. However, the vessel owner has a marine insurance plan; hence, in that case, they can choose the cause as seawater damage, which will help in claim settlement.

-Principle of Good Faith

Under the Marine Insurance Act of 1963, the principle of 'good faith' is crucial. It means that when filling out the marine insurance policy document, individuals need to provide all the correct information. The applicant should not withhold any information that can be crucial for underwriting.

If the applicant has withheld any information from the insurance provider, the company can reject the policy application or claim request on the basis of misinterpretation of information.

-Principle of Indemnity

The principle of indemnity explains that the insured can only be compensated for their actual loss, not more. The goal is to restore the insured to the same financial position they were in before the loss occurred. The insured cannot profit from the insurance claim, and the amount of compensation cannot exceed the actual loss suffered.

-Principle of Loss Minimisation

The principle of loss minimisation states the responsibility of policyholders at the time of maritime perils. By purchasing a marine insurance plan, policyholders cannot abstain from their duties to minimise the risk or loss at the time of an accident.

They need to take all the necessary steps to avoid the incident from happening, and if the incident somehow happens, then they should take steps to minimise loss. The necessary steps involve packaging goods in the right way, carefully loading or unloading goods and much more.

The marine insurance plan covers a wide array of perils. Some of the common perils which are listed under the Marine Insurance Act 1963 are:

• Accidents at sea include underwater obstacles, collisions with other vessels and more.

• Natural calamities include hurricanes, storms, earthquakes and more.

• Damage or theft caused by the Pirates.

• Damage or loss caused by the explosion or fire.

• Jettison, which means voluntarily throwing overboard part of the cargo or the ship's equipment to save the rest of the vessel or cargo from a greater loss.

• Bad weather or labour strikes that can delay ships at ports, leading to the loss of business or perishable goods.

Marine Insurance Act 1963 is the foundation of marine insurance plans. The act offers a legal framework for the enforcement and execution of marine insurance contracts. The marine insurance in India works under the Marine Insurance Act. This act offers guidelines and principles to the maritime industry.

All the parties involved in the maritime industry, such as cargo owners, ship owners, businesses, etc, need to know the implications and provisions of the Marine Insurance Act for better protection. By knowing the Marine Insurance Act, they will understand their marine cargo insurance implication and coverage better.

TATA AIG offers various SME insurance plans, such as marine insurance, tailored to the specific needs of your business. With our cargo insurance policy, we offer protection to cargo or goods in unforeseen circumstances, such as accidents, theft, etc., that may occur while in transit. The plan will offer financial security to the policyholder. With this in mind, consider investing in TATA AIG marine insurance plans to secure your shipments now.

Are there any changes under the Marine Insurance Act 1963?

The Marine Insurance Act of 1963 has not undergone significant changes recently, but there are ongoing discussions about updating it to address emerging risks like cyber threats and environmental hazards.

What is the warranty under the Marine Insurance Act?

Under the Marine Insurance Act of 1963, a warranty is a specific condition in the insurance contract that the insured must comply with.

If a warranty is breached, the insurer may avoid liability, even if the breach is unrelated to the loss. Common warranties include the seaworthiness of the vessel and proper stowage of cargo.

What if the marine insurance claim violates the principle of good faith?

If a marine insurance claim violates the principle of utmost good faith, the insurer has the right to void the contract or deny the claim. This could happen if the insured has concealed or misrepresented information that would affect the insurer's decision to provide coverage.