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Marine Insurance- Various claim handling guideline

A ship is insured against various risks by the Owner taking out different insurance policies. Nevertheless, for many reasons, insurance claims often being denied by marine insurance providers. The handling of a claim can be a complex and lengthy process. It should be noted that insurance premiums amount to a substantial proportion of the ship's running costs. While the Owner insures his ship against certain risks and may present a claim which will recuperate at least part of his losses, the effect of submitting many claims will increase the insurance premiums for the next year. It is, therefore, in everyone's interest to ensure that risks are not taken, that the ship operates safely, and that accidents and incidents are avoided.

In the event of a marine casualty, the shipowner can prosecute a claim accurately and successfully by taking some careful considerations. The ship Master needs to send full details and documentation relating to any accidents or incidents resulting in damage to the ship, property, cargo, or personal injury. It is, therefore, important that any documentation and correspondence on board concerning claims are filed carefully and are handed over during change of command. Nautical Institute publication, "The Mariner's Role in Collecting Evidence," is a good source of guidance to shipmasters.

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Procedure for Hull & Machinery claims

This insurance covers the ship and her machinery against damage and loss to an agreed value of the ship and is usually valid for one year between renewals. This policy is contracted through a broker between the Owner and various underwriters. These underwriters are listed at the end of the policy on a "slip." Amount of risk these parties are ready to share expressed as a percentage. The underwriter who has taken the highest portion of the risk is known as the lead underwriter.

In cases of hull and machinery damage, a ship management company on receipt of information start discuss with owners and decides whether or not a claim is worth pursuing. A major factor in the decision will be the amount of deductible in question. If it is decided that a claim will be made, then the ship manager will advise the H&M underwriters via their insurance broker. The underwriters will then, in turn, instruct a surveyor to attend the ship to ascertain the nature, cause, and extent of the damage. A representative from the Company will also attend the vessel and work in close association with the surveyor. Where the claim is expected to be very large such as in a major casualty, the surveyor appointed is likely to be a Salvage Association surveyor.

On the successful completion of the claim, the underwriters will pay the owners for the cost of repairs less than the agreed deductible. Repairs may be delayed until an agreement has been made with the underwriters concerning the value of the claim in question.

Ice accretion on deck
Icy conditions may give rise to many damage claims

Procedure for P&I claims

A claim will be initiated by a ship management company under the Club rules and regulations upon receipt of all relevant information and documentation from the vessel. Depending upon the nature of the claim, the services of a surveyor or Club correspondent may be employed. It is important to note that Owners must first pay the costs of any claim and will only recuperate their loss, minus any deductible, once a claim has been compiled and accepted by the Club. It must be stressed that for the Owners to bring about a successful claim, every aspect of the incident must be correctly and fully documented.

P & I Cover (relating to damage to or failure of ship's equipment) :
Handling cargo claims

When a cargo owner discovers a cargo loss or damage, he will immediately inform his insurer and arrange a survey report. If the cargo owner's underwriter considers that the claim is worth pursuing against the shipowner, he will then make a written claim accordingly. The shipowner will then, in turn, attempt to recuperate his losses on his P&I insurance.

It is worth noting that in many cases, the ship's staff are not aware of a potential cargo claim until the information comes back to them from the Company. It may be because no damage was indeed noted at the time of the cargo operation, and the ship was not advised. However, the ship's staff has seen some cases where cargo damage has been seen, but as no person from the shore has made any protest, the damage is not communicated to the Company.

It may be many months before the Owner is advised of a claim against him, and trying to mitigate the losses after such a time is almost impossible. It is therefore essential that if cargo damage is discovered or even suspected, the Master must advise the management company by completing a cargo damage report who, in turn, will arrange for a P&I correspondent to attend. It may cost the Company survey fees but will be considerably less than the cost to the Owner or the P&I Club for a damaged cargo claim.

Cash On Board (COB) Insurance

Managed vessels are normally insured against the loss or theft of (or damage to) Company funds carried on board. In the event of a loss or theft, the Master must:
  1. Notify the relevant Ships office.
  2. Advise local police (when in port).
  3. Obtain a police statement regarding the incident (when in port). If this statement is not in English, a translation should be obtained from the port agent.
  4. Obtain supporting statements from relevant crewmembers and/or any witnesses.
  5. Make a record in the Deck Log Book (submit to Ships office with Incident Report.
The Master should maintain a record of company funds held on board in the vessel's safe. Appropriate safety measures should be taken, including cash to master requests. Masters are reminded that only Company funds are covered and under no circumstances should other funds be retained in the ships safe.


While insurance, be it Hull and Machinery or Protection and Indemnity, exists to cover the Owner against losses, the Owner must agree to pay a proportion of the eventual claim. It is called a deductible. It is, therefore, important that every reasonable precaution is taken to avoid any damage or losses, which may lead to an eventual claim by being vigilant and employing correct working practices and procedures.


"Carriage of goods sea" rule imposes an obligation on the carrier to take good care to make the ship seaworthy. As the Master represents the shipowner on board the vessel, he needs to be aware of the precise meaning of the term seaworthy. In the event a problem arises, he will know what kind of evidence will be required to enable owners to defend any claims brought against them. Vessel seaworthiness must be confirmed at all stages of a voyage, including at the beginning. To be seaworthy, a ship must be:-
  1. properly crewed, fuelled, provisioned,
  2. have all equipment in working order,
  3. be equipped with up-to-date and corrected navigational charts,
  4. be structurally and mechanically sound, and
  5. have all certificates valid for the duration of the voyage.
The ship must also be fit and safe in all respects to receive the cargo and be ready to encounter any ordinary perils such as weather and high seas that can be expected for the voyage. Failure to maintain the ship in a seaworthy condition not only places the crew, the ship, cargo, and environment in possible danger but may affect the vessel's insurance in the event of a casualty.

Seaworthiness is also an important matter concerning the legal protection of the carrier under the Hague-Visby Rules. If the carrier can prove that due diligence was exercised to make the vessel seaworthy at the beginning of the voyage, then the carrier can be protected against cargo damage or loss due to certain perils and acts that occur during the voyage. However, should it be proved that the vessel was unseaworthy at the start of the voyage, then the carrier loses this protection and may become liable for all losses.

Institute Time Clauses

These clauses are named standard clauses which are attached to the H&M policy to form the terms and conditions of the contract. Whilst these clauses are made by the Institute of London Underwriters, they are generally used in a similar form throughout other insurance markets. Not all of these clauses will necessarily apply to the vessel insured and indeed additional clauses may be drawn up. However, in general, H&M insurance will cover damage or loss to the ship caused by;
International Navigating Conditions

The H&M policy assumes that the vessel trades within certain limits of navigation. These are called the International Navigating Conditions. A vessel may be allowed to sail beyond these limits, and it is therefore important that the Master acquaints himself with the limits laid down in the International Navigating Conditions and advises the Company who must first advise the underwriters that a breach of limits is required. The underwriters will then discuss the added risk and impose an additional premium on the Owners for breaching the limits. If the underwriters are not advised, and the ship does breach the limits, the vessel's H&M policy is void. The geographical areas and the dates on which the limits apply are shown in the Warranty Limit Table. If the Master is any doubt concerning such limits, he must contact the Company.

If the vessel is ordered to an area where a breach of International Navigating Conditions will occur, the Master needs to report this to the relevant management office as soon as possible, stating the expected date and time of entering the excluded area. It will enable the Company to ensure that the proper action is taken to extend the vessel's cover for breach of the same.

  1. Lloyds of London: The most famous insurance market with strong roots in shipping. Visit web siteto learn about its rich history and its role both past and present.
  2. Navigators, Inc.: Is an insurance company that has been providing marine insurance for decades and is a leader in the industry. They have offices in the New York area and worldwide.
  3. MICA: The Marine Insurance and Claims Association (MICA) is a professional insurance association that promotes fair and efficient practices in adjusting marine claims – whether hull and machinery, cargo, and others. Their annual meeting and dinner each October in New York is an excellent place to meet the industry and to learn about marine insurance generally. Membership in MICA is open to anyone interested in marine claims and insurance.

Related articles
  1. General Average & The York Antwerp Rules
    The law of General Average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. It is a unique maritime concept. One of the most ancient aspects of shipping is the general average. When an intentional sacrifice of property is made onboard a ship to avoid a common peril, the general average law requires all of the parties to the maritime adventure that benefited by the intentional sacrifice to contribute money on a pro-rata basis.

  2. P&I Clubs guideline
    The P&I Clubs are correctly called Protection and Indemnity Associations and number around 20 worldwide, with the majority being the United Kingdom-based. The shipowner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual, which means that all costs involved in providing cover or paying out a claim to anyone are shared by all members. It is achieved by setting a rating or premium for the Owner, known as an "advance call," based on the Owner's history and exposure to risk.

  3. Marine cargo insurance underwriters
    Ships operate in a difficult environment, and cargo may be lost or damaged during domestic and international transit. However, ocean carriers are well protected under the law against responsibility for loss or damage to cargo that might arise during the transportation of goods.

  4. Hull & Machinery underwriters
    A hull and machinery underwriter provides insurance coverage for boats, ships, and other naval assets. It gives protection to shipowners against the hull, machinery, and onboard equipment damages in the event of any perils encountered while on the water, including collision with another vessel, natural obstacles, and other structures as well as storms and other natural disasters.

  5. Procedure for insurance claim
    A ship is insured against various risks by the Owner taking out different insurance policies. However, for many reasons, insurance claims often being denied by marine insurance providers. So that a shipowner can prosecute a claim accurately and successfully, the Master needs to send full details and documentation relating to any accidents or incidents resulting in damage to the ship, property, cargo, or personal injury. Nautical Institute publication, "The Mariner's Role in Collecting Evidence," is a good source of guidance to shipmasters.

  6. The role of a insurance broker
    Marine insurance brokers play a significant role in helping companies and individuals procure marine cargo insurance, hull and machinery insurance, P and I cover, and other forms of insurance as the case may be. They can canvas the worldwide marine insurance market. The goal is to assist in getting the best terms of insurance cover at the most competitive premium rates.

  7. Marine salvage procedures
    Marine salvage contracts fall into two main categories. First, those which enable salvage services to be rendered on the basis that the compensation to be paid to the salvors will be determined after the completion of the services. It can be done by direct settlement or if the parties cannot accept, then by a court or by an arbitrator

  8. Role of a freight forwarder
    A freight forwarder, forwarder, or forwarding agent, is a person or a business entity that organizes shipments for individuals or corporations to get the goods from the point of origin to the desired market or from a producer directly to the customer or a distribution center. A freight forwarder dispatches shipments via a common carrier and books or arranging spaces for those shipments on behalf of shippers.

  9. How a Non-Vessel Operating Common Carrier ( NVOCC) differs from a freight forwarder?
    A NVOCC (Non-vessel Operating Common Carrier) is "a common carrier that holds itself out to the public to provide ocean transportation, issues its bills of lading or equivalent documents, but does not operate the vessels that transport cargo." An NVOCC is a carrier. It enters into a contract of carriage with the cargo shipper. It undertakes responsibility for the carriage like a shipowner that owns a vessel. However, the NVOCC is a carrier that does not own or operate the vessel used to perform the carriage.

  10. P & I Insurance cover and Members of IG club
    At the heart of P and I is the concept of "mutuality." Shipowners form a nonprofit association to protect and indemnify one another against third party liabilities. Unlike commercial insurance, the insured ship owners, meaning the "members" of the Club, are both the insurer and the insured. Each P and I Club is controlled by its members.

  11. Role of shipbrokers
    London and New York have always been viewed as major shipbroking centers. In recent years, many U.S. ship brokerage firms have relocated to offices in Stamford and Greenwich, Connecticut, and nearby communities. Of course, there is a large shipbroking presence in Singapore, Hamburg, as well as other cities.

  12. Sale & purchase brokers
    Sale and Purchase Brokers (S and P Brokers) are highly specialized shipbrokers. Their clients are typically ship owners. S and P Brokers serve as intermediaries in the business of selling and buying ships. They assist in the sale and purchase of second-hand tonnage and newbuilding. Their compensation is normally in the form of a commission.

  13. Ship agency services
    A ship's agent works on the front lines, and there might involve an unlimited number of issues in port. The agent must work towards solving these problems. An agent needs to learn a lot fast about ships and cargo.

  14. Role of a ship management company
    Ship management companies are located in the world's maritime centers. Many companies manage large fleets on behalf of numerous ship owners. Many of the larger management companies also own vessels. Essentially, the decision to outsource a ship management function is a financially driven one. In most cases, outsourcing of ship management services means that the shipowner can conduct business at a reduced cost, primarily due to reduced in-house staff and resources.

  15. Ship finance considerations
    Ship finance is somewhat different from other asset-based lendings such as real estate finance. After all, shipping business earnings can be quite volatile and, therefore, less predictable. Additionally, the collateralized asset (the ship) is extremely mobile. The traditional method for ship finance was private resources.

  16. Ship recycling industry
    Scrapping ships (also known as ship breaking or ship demolition) is a dangerous and controversial part of the shipping business. Ships have a life span of 20 – 30 years – sometimes a little more -sometimes a little less. Ships wear out, and there may be a lack of spare parts. After a while, they no longer make sense economically. The shipowner needs to make a decision – continue to repair or scrap.

  17. Ship registry procedure
    To trade internationally, a ship must have a nationality. Without being registered under certain flag states, a ship cannot enter another state's geographic limit. Once registered, a ship becomes subject to the laws of a registering nation. Registration makes the ship entitled to military protection, and therefore it is an extension of that nation anywhere in the world.

  18. Maritime security concerns
    Maritime security issues affect how ship owners, charterers, cargo interests, ports and terminals, and their insurers do business. There is the added expense to deal with. There has also been an increase in the number of international conventions and domestic legislation geared towards furthering maritime security.

  19. How maritime law works in the United States?
    Maritime law used to apply only to American waters within the ebb and flow of the tide. However, it now covers any waters navigable within the United States for interstate or foreign commerce. Admiralty jurisdiction also includes some maritime matters not involving interstate commerce, for example, recreational boating.

  20. The Master’s Responsibility during Salvage Operation
    Request for Salvage - The Master shall normally request salvage after consultation with the Company. However, he has complete authority to seek salvage assistance without referencing the Company if he considers this necessary.

  21. Requirement of towing arrangement in oil tankers, readyness, & training onboard
    All Oil, Chemical and Gas Tankers above 20000 DWT, constructed on or after 1st July, 2002, are equipped with an “Emergency Towing Arrangement (E.T.A.) both Forward And aft to provide the ship with a rapidly deployed towage capacity in an emergency.

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