Both to blame clause in Marine Insurance policy

A both-to-blame collision clause is a significant aspect of any ocean marine insurance in India. Under this clause, both vessel owners need to share the burden of loss incurred under it to allow fair distribution of financial liabilities.

Simply put, if two vessels collide due to combined negligence and carelessness, the owners and shippers of both vessels must share the loss incurred based on the proportion of the pre-collision monetary value of their individual cargo and goods.

The maritime industry is growing significantly, and at present, many new-age technologies have been employed within the overall industry to ensure minimum damage and loss. However, involuntary accidents and collisions are not controllable.

When two vessels collide due to negligence on both ends, the companies involved in the incident can request the applicable cover for losses incurred by their ship and goods under their ocean marine insurance policy.

To understand how this clause works, find the different stages below.

Collision - Two vessels collide and incur severe damage.

Liability Calculation - As both vessels were negligent, the investigation kicks in. This includes assessing the weather updates and navigation routes at the time of the incident for both parties and applying relevant legalities to calculate the percentage of blame to be shared by each of the vessels involved.

Both-to-Blame Clause Application - Once the investigation indicates the combined fault of both vessels with a set blame percentage for each, one or both owners can then request a claim with their marine insurance. The insurer will most likely cover a part of the repair cost based on policy terms and conditions.

Claim Settlement - Once the insurer receives the claim, it will conduct another investigation into the incident. Based on the blame percentage imposed on the vessel and the insurance plan, it will determine and conclude a settlement amount for the loss or damage incurred by the vessel(s).

To understand the both-to-blame collision clause better, let us look at the example below:

• Company X sent a shipment from India to the USA.

• During transit, Company X’s vessel and Company Y’s vessel collided, leaving both vessels with significant damage.

• The total loss incurred by both the vessels valued at ₹20,00,000/-

• Both Company X and Y have marine insurance with a both-to-blame clause.

• An investigation took place right after the incident to assess whether one or both vessels were at fault. After a thorough assessment of the weather and navigation routes, the following was concluded in the investigation:

• The weather and flow of water were favourable.

• The route taken by Company X was correct.

• The route taken by Company Y was correct.

• Company X’s shipment faced a gap in the radar system which can be a small reason behind the collision.

• Company Y’s shipment delayed the last turn by 30 minutes which can be a small reason behind the collision.

• The investigator then releases the blame percentage between both the vessels as 60/40.

• Company X is liable to pay for 40% of the loss, and Company Y is responsible for 60% liability due to a delayed change of route.

• Given that both company vessels have marine insurance, they both filed for a claim settlement against the total loss incurred and their blame percentage. Let us look at the hypothetical insurance settlements below.

• For Company X, the blame percentage is 40% (₹8 lakhs), so based on the policy terms, the insurer can extend a claim settlement amount of up to 60% (₹4.8 lakhs) of the total repair costs.

• For Company Y, the blame percentage is 60% (₹12 lakhs), so based on the policy terms, the insurer can extend a claim settlement amount of up to 40% (₹4.8 lakhs) of the total repair costs.

In a marine insurance policy, a both-to-blame collision clause is a significant aspect that helps in the fair division of loss incurred between both vessels if the collision is due to the fault of both vessels involved.

Therefore, investing in a marine insurance policy from top insurers like Tata AIG that provide global coverage with their plans and ensures timely claim settlements to keep your finances secured.

We offer ample customisation flexibility with all our plans to cater to the specific needs of companies. You can also choose any of our transit insurance plans to safeguard your shipments from unexpected damage and loss.

Are there any types under a both-to-blame clause in marine insurance?

The most common type under a both-to-blame clause is proportional basis, wherein the total loss is divided into blame percentages based on the investigation. However, other than this, there are other lesser-known and implemented variations called the one-third or three-forth clause.

Within these variations, the parties involved have to pay a fixed amount towards the total loss. For instance, if the loss incurred is ₹12 lakhs, one-third will be on the vessel with less blame and two-thirds will be on the vessel with more blame.

How to buy marine insurance online from Tata AIG?

Go to the Tata AIG website.

Select “Marine Cargo Insurance” from the “All Products” dropdown menu.

Enter the requested details correctly and click on “Get Plan”.

Review the plans offered, pick the one you like, customise if needed, and make the premium payment to buy the plan.

Once done, the marine insurance policy will be shared on your email address.