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Marine Liability Insurance

  • Author :
  • TATA AIG Team
  • Published on :
  • 16/01/2024
  • 2 min read

Marine Transportation business is a complex field not just in terms of doing business but also safeguarding the business from any unforeseeable events. That is why the concept of marine insurance was introduced so that cargo/ship and carrier owners can do business without fretting too much about losses and liabilities.

But the problem does not just end here; marine insurance itself has several complex elements that need to be understood. One such talked about and most discussed element is “marine liability insurance.”

In this article, you will get to understand about marine liability insurance in detail.

What is Marine Liability Insurance

Liability insurance in marine insurance means that the insured has the legal responsibility towards the loss or damages caused to third parties or their goods/properties during the whole transportation.

The damages can include loss of goods/properties, injuries to ship crew members, and loss/damage to the other party vessels. Every party involved in this insurance must understand their role and responsibilities.

It includes the insured (ship/cargo owner) and the insurer (insurance company). Doing so will make sure that no one’s interest is harmed while doing the legal settlements of insurance.

Types of Marine Liability

There are several types of liabilities covered under the marine insurance policy to protect the insured (ship/cargo owner) from financial losses arising from the legal liabilities and damages caused to third parties during marine transportation. The liabilities covered by marine insurance include:

Cargo Liability: Cargo insurance covers the losses or damages incurred to the cargo that was being transported by the ship. It covers the damage caused by theft, stormy sea, pirating, and any other unforeseeable circumstances.

Third-Party Liability: It is a crucial liability that marine liability insurance covers. It includes losses or damages that occurred to third-party’s cargo, ship, or any other properties because of the insured vessel.

It includes damage or loss that happened due to grounding, collisions, stranding, overturning, derailment, or any other unfortunate events.

Liability for Personal Injuries: It is the aspect of liability insurance to cover damages, or losses that occur to properties and people too. Personal injury liability covers losses or damages that result from injuries and deaths of ship crew members on board during transportation, including legal and medical expenses.

Hull and Machinery Liability: This liability covers damages or loss that happened to the ship/cargo and machinery present in it due to collisions, grounding, overturning, rough seas, or any natural calamities.

General Average Liability: It is the type of liability in which the ship/cargo owner has to sacrifice a part of the ship or cargo intentionally to save the rest of the ship or cargo from damage or danger.

Such situations arise due to unforeseeable events; thus, the loss incurred is shared proportionally among all the parties involved in the payload.

Pollution Liability: Pollution liability covers the financial liabilities arising from the pollution caused by the insured vessel. It includes paying for the financial cost of cleaning pollution and damages to third parties.

Wreck Removal Liability: This marine liability insurance covers the financial costs associated with the wreck removal of an insured vessel in case the incident is insured. It covers all the costs of clearing the waterway and decreasing the environmental hazards caused.

Legal Factors of Marine Liability Coverage

There are certain legal factors involved in the marine insurance policy that are important for the insured to understand so that they know their rights and responsibilities in case of any accidents. Here are some essential legal factors involved in marine liability insurance.

Contractual Liability: It is the primary factor that governs the whole marine liability insurance terms between the insured (ship/cargo owner) and insurer (insurance company).

The contract basically specifies the coverage scope, amount of policy limits, and conditions under which the insurer will pay out the insurance amount. Thus, it is crucial that both the insured and insurer understand carefully and then agree upon the terms of the contracts.

Statutory Liability: Marine liability insurance is subject to various statutory rules that are imposed by law. Like in India, the Insurance Act of 1938 governs marine liability insurance and provides a legal framework for it. The act includes the statutory rules that are obligable to the insurance companies of India.

Tort Liability: Under this legal factor, the insurer takes the responsibility to pay for the damages to third-party resulting from the actions of the insured. Like, if the vessel owned by the insured overturns upon the other’s vessel, then the insurer is liable to pay for damages and loss to the other party.

International Liability: Marine insurance liability is bound to follow specific international laws. Such as the International Convention on Civil Liability for Oil Pollution Damage to avoid any conflicts.

What is the Limitation of Liability Clause in Marine Insurance

Marine insurance is a broad category and includes several types of insurance policies, which are made with specific conditions. One such policy is the marine open policy, which offers coverage to the cargo to the multiple shipments made during a year.

For this, the insured needs to provide all the details regarding the shipments made during that time, including the type of goods transported, modes of transportation used, etc.

However, the annual open policy is based on conditions agreed upon under the “limitation of liability clause in marine insurance.” Under this clause, the insured agrees to the maximum sum that is insured of the total value of the shipment.

That is why it is a crucial condition for the insured (ship/cargo owner) because the limitation of liability clause means that the insurer is not liable for making payment for shipment if the sum exceeds this agreed limit.

Difference between Marine Liability and Marine General Liability Insuranc

Whenever the topic of marine liability insurance is discussed, the term general liability insurance is also brought up. Let us understand the difference between the two through this table.

Category  Marine Liability Insurance  General Liability Insurance
Meaning Marine liability insurance provides coverage for damages resulting from business maritime activities.  General liability insurance provides coverage against people and property damage resulting from standard business operations. 
Coverage  The insurance protects businesses engaged in maritime trade from damages resulting from maritime hazards.  It covers liability against bodily harm that occurred to the company or people on the insured premises during business activities.  
Risks Covered Marine insurance liability covers risks associated with maritime activities, for example, collision, grounding, overturning, and rough seas. General liability covers common business risks like slipping on the office floor, damage that occurred during business operations, or damage from company products. 
Insurance Includes The insurance includes coverage for damages like vessel theft, crew-passenger injuries, and third-party damages.  It includes bodily harm, property damages, legal fees, and medical expenses. 
Insurance Excludes Illegal activities, war, piracy, and other inevitable events are not covered.  Intentional injury and errors 

Summing Up

Marine trade liability insurance protects businesses and individuals in uncertain business scenarios. It is there to cover your financial losses and protect you from severe legal responsibilities in case of damage and loss of lives and property. Tata AIG offers marine insurance with customisable features at affordable premium rates.

FAQS

What are the types of claims included in marine liability insurance?

Claims like collision claims, cargo claims, pollution claims, and personal injury claims are included in marine liability insurance.

What are the three types of marine insurance?

The three essential types of marine insurance are ship or hull insurance, freight insurance, and cargo protection.

When should I buy marine insurance?

You should buy marine insurance before the shipments start and you must have an invoice or receipt of transportation for it.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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