01. presentation for marsh mumbai on overview of h&m insurance claims, 03-jun-10

By

Prof. Tony FernandezAverage Adjuster, Mediator, Arbitrator & Learning Facilitator

Foreign Associate Member – Association of Average Adjusters of the United States

MARSH Mumbai – Overview of H&M Insurance © Prof. Tony Fernandez, 03-Jun-10, 01/30

PRESENTATION TO MARSH MUMBAI

Hull & Machinery Insurance Claims

- An Overview

Presentation Objectives

1. To enumerate the nature and extent of Risk Exposure to a Shipowner and to Seafarers.

2. To discuss the nature and extent of H&M Insurance Cover for Shipowners.

3. To describe the responsibilities of Shipowners and Seafarers under a Policy of Marine Hull Insurance.

4. To understand the different types of H&M Claims and the process of Claims Settlements.


Presentation Plan

1. Overview of Shipowners’ Risk Exposure

2. Proposal for H&M Insurance & Renewals

3. Duties of the Assured during Policy period

4. Types of H&M Claims

5. Claim Documentation & Claim Procedures

6. Summary and Conclusions


Ship

Cargo

Contractor’sEquipment

LeasedEquipment

Containers

Bunkersof T/C

Freight at Risk

Parties Involved in a Maritime Adventure


“Horror-Scope”

MARITIME PERILS

HUMAN FRAILTY

INEXPLICABLEACCIDENTS

INEVITIBLEOCCURRENCES

Personnel

Disability ofPersonnel

Death ofPersonnel

Property

OwnedProperty

Others’PropertyProfits

TangibleProfits

IntangibleProfits

Liability

LegalLiability

ContractualLiability

Risk Exposure to Parties of a Maritime Adventure

* KETU (Arrogance)

* RAHU (Ignorance)


“Maritime Perils”

“‘Maritime Perils’ means the perils consequent on,

or incidental to, the navigation of the sea, that is to

say, perils of the seas, fire, war perils, pirates,

rovers, thieves, capture, seizures, restrains and

detainments of princes and people, jettisons,

barratry, and any other perils of the like kind or

may be designated by the policy.

The Marine Insurance Act 1906


“Human Frailty”

Human Frailty means human weakness and

comprises of “human error” and “human

misdeeds”. The former is not intentional,

while the latter is intentional and deliberate.


“Inexplicable Accidents” and “Inevitable Occurrences”

Inexplicable accidents refers to those types of

accidents which cannot be explained in terms

of how or why they were caused.

Inevitable occurrences refers to those types

of occurrences that are bound to occur and

are not fortuitous, such as wear and tear.


Definition of “Accident”

An accident is an undesired and unexpected sequence

of events leading to a loss. Within a marine context,

this may involve a fatality or injury to persons, damage to

a hull / machinery, loss of profits and incurring of

Penalties or Liabilities under law or contract.


Concepts of Marine Liabilities

Liability is a debt owed to another, for damages caused, either under Common Law, Admiralty Law, International Convention, National Statute or under a Contract.

In order to obtain compensation for maritime liabilities, legal proceedings are instituted eitherIn Rem or In Personam.

Liability is subject to Immunity and Limitation.


Types of Maritime Liabilities

Liabilities

UnderCommon

Law

UnderStatutes &

Conventions

UnderVarious

Contracts

UnderAdmiralty

Law

- Collision- Contact, Etc.

- Salvage- General Average

- Carriage by Sea- Pollution, Etc.

- Carriage by Sea- Agency, Etc.


Professional Risk Carriers

PropertyH&M

LiabilityP&I

Pecuniary Loss Of

Hire

Strikes(P&I)

War(P&I)

Strikes(H&M)

War(H&M)

CargoEtc.

FreightEtc.


Classification of Marine Hull Insurance Policies

Marine HullPolicies

RestrictedCover

“Wider”Cover

Total LossOnly

Total Loss & Liability

“All Risks”Policies

“Named Perils”Policies


Institute Builders’ All Risks Owner’s Clauses

Institute Time Clauses Institute Voyage Clauses

Hull & Machinery Insurance Policies

Types of H&M Policies

“All Risks”

“NamedPerils”


The Edifice of A Hull & Machinery Insurance Policy

Principle of Utmost Good FaithPrinciple of Indemnity

Prop

erty

Los

s

Pollu

tion

Haz

ard

Som

e Li

abili

ties

Sue

& L

abou

r

Win-Win Approach

Proximate Cause, Insured Perils, Excluded Perils, Warranties, Deductibles etc.


Damages fully repaired Damages partially repaired Damages un-repaired

Actual Total Loss (ATL) Constructive Total Loss (CTL) Compromised / Arranged CTL

Classification of Property Losses

Property Losses

Partial Total


¾ Cover Under H&M ¼ Cover Under P&I Sister-ship Collision

No Cover under H&M Full Cover under P&I

Classification of Common Law Liabilities

Common Law Liabilities

Collision Liability

Contact Liability, Etc.


Pure Maritime Salvage Sister-ship Salvage Contractual Salvage (LoF)

Common Safety Common Benefit Contractual (Y-A Rules)

Classification of Admiralty Law Liabilities

Admiralty Law Liabilities

MaritimeSalvage

GeneralAverage


No cover under H&M

Covered under P&I

Classification of Statutory Law Liabilities

Statutory Law Liabilities

NationalStatutes

InternationalConventions

No cover under H&M

Covered under P&I


No Due Diligence Proviso Due Diligence Proviso

Institute Time Clauses – Hulls

Insured“Named Perils”

Pure MarinePerils

“Inchmare”Perils


“Pure Marine Perils” Covered In ITC Hulls 1/10/83

6.1 This insurance covers loss of or damage to the subject- matter insured caused by:-

6.1.1 Perils of seas, rivers, lakes or other navigable waters,6.1.2 Fire, explosion,6.1.3 Violent theft by persons from outside the Vessel,6.1.4 Jettison,6.1.5 Piracy,6.1.6 Breakdown of or accident to nuclear installations or reactors,6.1.7 Contact with aircraft or similar objects or objects falling therefrom, land conveyance, dock or harbour equipment or installation,6.1.8 Earthquake, volcanic eruption or lightning


“Inchmare Perils” Covered In ITC Hulls 1/10/83

6.2 This insurance covers loss of or damage to the subject-matter insured caused by:

6.2.1 Accidents in loading, discharging or shifting cargo or fuel

6.2.2 Bursting or boilers, breakage of shafts, or any latent defects in the machinery or hull

6.2.3 Negligence of Master, Officers, Crew or Pilots

6.2.4 Negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder

6.2.5 Barratry of Master, Officers or Crew,

provided such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers


Liability Risks Covered In ITC Hulls 1/10/83

Liability Risks

Legal Contractual

Admiralty Law

Statutory Law

Maritime SalvageGeneral Average.

PollutionWreck RemovalCustomsImmigrationSea Carriage

EmploymentSeafarers,Shore Staff, Etc.

ContingenciesSalvage (LoF),GA (YAR).

Other Contracts“SCOPIC -2000”“Wreck Hire” Etc.AgencyManagersSea Carriage

H&M – ITC Hulls 1/10/83

Common LawContact, Etc.

Collision (3/4)


Types of H&M Insurance Claims


1. Physical Loss / Damage to Hull / MachineryCaused by Insured Perils

2. Physical Loss / Damage to Hull / MachineryCaused by Governmental Authorities

3. Liability Claims arising under Collision LiabilitySalvage Liability and General Average Liability

4. Claims under Loss Minimization at Sea – Sue & Labour and Single Interest General Average

Impact of the Marine Insurance Act 1906


1. Background of the Marine Insurance Act 1906

2. Nature of MIA 1906 – Prescriptive, not Regulatory

3. Relationship between Act and Policy

H&M Claim Processing

SHIPOWNERDocumentation INSURANCE

BROKER

H&M INSURER AVERAGE

ADJUSTER

OWNER’SSURVEYOR

INSURER’SSURVEYOR

CLASSIFICATIONSURVEYOR

SURVEYREPORT

SURVEYREPORT

CLAIM DOCUMENTS

Statementof Adjustment

Settlement


Responsibilities of Shipowner / Seafarers

1. Observe the Utmost Good Faith

2. Pay Premium and comply with Policy Conditions

3. Strictly comply with all Warranties

4. Act prudently as if not insured

5. Act with Due Diligence at all times

6. Be Prompt in Claim Intimation


Continued…

07. Protect Rights of Recovery

08. Never admit Liability to other Parties

09. Mitigate Loss promptly

10. Document all facts accurately

11. Intimate Accidents and Near Misses

12. Use Professional Intermediaries


(Continued)

Responsibilities of Shipowner / Seafarers

01. “Competing” with the un-professionals

02. Light the Lamp to dispel the darkness

03. Counter “Arrogance” with Professionalism

04. Base Relationships on “Win-Win”

05. Build and maintain Strategic Alliances

06. Learn Lessons from the mistakes of others


Local Challenges For Professional Brokers

1. Risk Exposure in the Shipping Industry is very highand needs to be effectively managed.

2. H&M Insurance does not respond to all Risks and Perils. The Deductible has to be borne entirely by Shipowner.

3. Duties and Responsibilities of Shipowners and Seafarers under a H&M Policy of Insurance are onerous.

4. Be Proactive after a loss by documenting facts accurately and submitting Claim Documents in time.


Summary & Conclusions