duty of the assured prepared by: ms. norazimah mazlan

DUTY OF THE ASSURED

Prepared by:

Ms. Norazimah Mazlan

1. DUTY TO MINIMISE OR AVERT LOSS :

(Sue and Labour Clauses)

DEFINITION

It is a duty of the assured and his agents to take reasonable steps to minimise or avert loss

The duty depends on the reasonableness of the actions taken. It is a question of fact (depends on the facts of each case.)

Can the assured claim expenses incurred while trying to avert of

minimise a loss?Section 78(1) of the MIA 1906:“Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause”

Answer: -Yes, if the policy contains a suing and labouring clause

EXAMPLES OF SUING AND LABOURING CLAUSE

Institute Time Clause Hulls (1995)

• Clause 11.1

In case of any loss or misfortune, it is the duty of the assured and his servants and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance.

Institute Cargo Clauses (A), (B) & (C)

• Clause 16

It is the duty of the Assured and their employees and agents in respect of loss recoverable hereunder

16.1 to take such measures as may be reasonable for the purpose of averting or minimising such loss

Kidston and other v Empire Marine Insurance Co Ltd

• During the voyage, the vessel was badly damaged by bad weather. She was declared a constructive total loss.

• The master chartered another vessel to carry the cargo to the destination.

• The plaintiffs claimed from their insurers for the expenses in chartering another vessel and

cargo handling fees.

• Held: The expenses for chartering a new vessel

was recoverable under the suing and labouring clause.

There was a danger of total loss of the freight due to the loss of the ship. The expenses were incurred for the benefit of the underwriters. The assured mitigates the loss which the underwriter would have been liable.

“Duty imposed upon the assured and his agent”

• A duty to sue and labour includes acts done by the master and crew in mitigating the loss (as an agent of the assured).

• This duty does not apply to shipbuilders and salvors because they are not agents of the assured.

2. Duty of the Assured Not to Submit Fraudulent Claims

Concept of fraudulent claims :

In making a claim, the assured makes a statement in the knowledge that it was false or without belief in its truth.

Situations in which fraudulent claims occur

• It is fraud to bring a claim where the assured knows that the insurer is not liable for the loss.

e.g. making a claim on the hull policy for total loss of the vessel that has in truth been scuttled. (**Scuttling is not covered under the term “perils of the sea”, thus, it is not recoverable under the policy.)

• Claiming indemnity greater than which is payable.

e.g. exaggerating the value of lost or damaged property.

• THE END.

SUBROGATION

Definition

The principle of subrogation provides that an insurer who has indemnified an assured for a loss may exercise the assured’s right to claim for the third party in respect of loss.

The insurer is entitled to step into the shoes of the assured after indemnity is paid to the assured.

Objective

• The principle of subrogation has been developed to prevent the assured from getting more indemnity when he has two or more avenues to recover his loss.

Subrogation in cases where the insurer pays for a total loss

s.79 (1) Where the insurer pays for a total loss, either of the whole, or in the case of goods of anyapportionable part, of the subject-matter insured, he thereupon becomes entitled to take over theinterest of the assured in whatever may remain of the subject-matter so paid for, and he is therebysubrogated to all the rights and remedies of the assured in and in respect of that subject-matter asfrom the time of the casualty causing the loss.

Settlement of total loss s.79 (1)

1. The insurer has right to take over the interest of the assured in whatever may remain of the subject matter so paid for, (concerned with the proprietary rights of the insurer in the event of abandonment being accepted)

2. The insurer has rights and remedies of the assured in respect of the subject matter by way of subrogation after the assured had been indemnified.

Subrogation in cases where the insurer pays for a partial loss s.79(2)

• The underwriter subrogates all rights and remedies the assured would have had against third parties.

• Section 79(2) of the MIA 1906:

• “… where the insurer pays for a partial loss, he acquires no title to the subject matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment of loss.”

Settlement of partial loss s.79 (2)

• The insurer has no proprietary rights in any subject matter remaining.

• The right of subrogation is limited to the portion of the loss for which the insurer has indemnified the assured.