Ocean Marine Exposures to Loss
Ocean Marine Insurance, which is sometimes referred to as wet marine insurance, is typically covering vessels and cargoes that are transported over waterways. Those waterways can be oceans, rivers, lakes, and any other body of water. While there are obviously general liability exposures with regards to ocean marine, in this article today we are going to mainly focus on the property portion of vessels and their cargoes.
Vessel Property Exposures to Loss
Besides the many exposures to loss for the vessel, there is an inherent exposure to loss of income from the revenues that are generated from the use of the vessel. Values must be determined for the repair or replacement of the vessel as well as the ongoing loss of income. The loss of income determination needs to be calculated carefully so that the downtime in the repair or replacement of the vessel is calculated correctly. In the marine area of maritime law there are some unique characteristics with regards to losses. One of those is what is called general average clause, which is the sharing of partial losses by all parties concerned.
Clearly cargo that is being shipped from San Francisco to Taiwan can suffer losses that are caused by either the shipper, the loader of the cargo onto the vessel, the transporter of the cargo while in transit, the unloading of the cargo at the final destination, and the delivery of the cargo at the final destination. In the ocean marine area the cargo can be touched and handled by many different parties any or all of those parties could contribute to risk of loss and/or be held liable.
Ocean marine insurance has some unique exposures to lost that usually are not found on land. There are some typical exposures such as fire lightning, earthquake, hurricane, etc. Usually one of the most unique coverages that are provided is what is called jettison coverage. This coverage is whereby the crew intentionally throws overboard the cargo in order to save the vessel and/or its crew. On land if a client intentionally destroys their property there would be no coverage for this action.
Some of the typical exclusions on this type of policy would be loss is due to war and/or strikes. While strikes might delay the cargo from being delivered, strikes normally do not result in damaged cargo goods. The damage arises from the loss of income for lack of use of the cargo and its goods because the end user is not able to put those cargo goods into the marketplace.
There are some unique provisions in the ocean marine policy that are not in the contracts of your typical property insurance policies. If there is a change of ownership that can sometimes automatically terminate the insurance coverage. Most ocean marine policies have territorial and geographical descriptions of coverage areas. Traveling outside the coverage territories can void the insurance policy.
We have primarily discussed ocean marine cargo insurance and now we would like to discuss the ocean marine vessel insurance. The typical policy is called protection and indemnity insurance. This covers the bodily injury and property damage operation of the vessel. On this policy typically you can add Hull insurance coverage which protects the vessel from damages. Some other coverages I can be added or purchased separately depending on the exposures are: builders risk insurance, which would cover repairs and remodels on the boat while under construction. Marine operators need legal liability insurance which would protect other people’s vessels that are in the care custody and control of the insured. If the insured buys and sells boats you would need a boat dealer’s insurance policy or if you offer charters for taking people out in the waterways you would need special charter’s liability insurance. All of these protection and indemnity insurance policies can be purchased for specific water exposures or you can endorse many of the coverages onto the one policy.