Marine insurance traditionally covered 3 basic areas
With the advent of the offshore oil and gas industry insurance is required to cover the construction and installation phases of offshore construction projects as well as the testing & commissioning activities of the permanent components of the project.
Under the above case, the cargo ship possessed an insurance policy and which also covered the in transit risks. In this case, there has been the occurrence of a breach of warranty. There has been a violation of the conditions for the warranty because the shipper was aware of the immediate as well as the proximate risks that were going to come in future while the ship was on board. There would be an absence of the breach of conditions of the warranty, had there been a sudden outburst of torrential natural disasters without the knowledge of anyone. The shipper undertook the risk because he was insured under the policy and did not want to earn a loss in the business. Despite knowing the fact that there would be torrential activities he went ahead to proceed. Knowing the intensity of the risk that the cargo ship could be completely totaled, he undertook the risk. This resulted in the violation of the terms and conditions of the insurance policy and a breach of warranty.
In this case, the insurer could ask for a breach of warranty. This is because the shipper not only possessed the responsibility of delivering the cargo by ship but also possessed the responsibility of delivering it safely. Though the damages were minor, yet there were damages. This was the result of the violation of the conditions. The holding dock means the place where the ships are parked. The damage was noticed there. However the damage could have occurred also during the voyage or at the hold dock. Even if it was at the holding dock, it was inside the ship and the shipper owed the responsibility to take reasonable care of the cargo. Therefore, there was a breach of warranty and could be issued.
Facts of the case study:
The claimant started proceedings under the war risk insurance policy for a vessel known as B ATLANTIC with regard to CONSTRUCTIVE TOTAL LOSS (CTL). Back in august 2007, the vessel undertook cargo in Venezuela to transport to Italy. Under the pre departure investigation in Venezuela, three cocaine bags were found attached to the hull of the ship, beneath the line of water. After that, the ship was stranded in Venezuela. The underwriters stated that the vessel was not a constructive total loss, but it was stated that the loss of the vessel was a danger insured against. The insurance policy contained provisions for institute’s war and hull. The underwriters laid emphasis upon the excluding of the clauses 4.1.5 of the institute war clauses. The claimants stated that they were unaware of the cocaine bags and did not possess any business of trafficking of drugs. The second officer and master were convicted of trafficking of drugs. The claimant could not be convicted of the same offence and the case was motivated by politics. The claimant finally stated that B ATLANTIC was detained and kept captive in Venezuela, as per the orders of the higher authorities due to the involvement of the third parties through the addition of noxious substances and drugs in the vessel. Under the law of Venezuela, the vessel was supposed to be released on 31st October 2007 after the completion of the initial hearing of the parties in the drug trafficking case. The continuous capturing of the vessel was in contradiction to the laws of Venezuela and was thus, not the outcome of the local regulations.
The immediate issues involved in this case are whether B ATLANTIC, the vessel was considered to be a CTL (Constructive Total Loss)? Another important issue which has arisen in the case study is that whether or not, B ATLANTIC should be detained further? The laws are different in different places, but should the law of Venezuela be followed? Another issue with regard to the case study is that, the date of release of B ATLANTIC was passed long ago. What would be the immediate remedies available to the vessel to be free?
A Constructive Total Loss (CTL) in insurance for a vessel refers to an entirety of loss. The loss is so extreme that the vessel cannot be put to further use ever. The price of repairing the loss exceeds the price of the present value. When there is a constructive total loss of any ship or vessel, it is considered to be a garbage which would not put to be in further use. It also includes the claiming of insurance which has been set p for the value in the entirety with the associated coverage. With reference to the above case study, the vessel B ATLANTIC could not be considered as a constructive loss. This is because there were ample chances of the vessel to be put to many uses in the future. Instead of detaining it and rusting it without fault, it can be put to use. There were no damages which needed repair as well. Three bags of cocaine were found in the hull of the vessel. This did not imply that the ship would be at a blissful loss. Thus, these conditions clearly imply that the vessel, B ATLANTIC was not a constructive total loss (CTL) (Anderson &Mostue, 2012).
The insurance policy did notinclude in itself, arrest, restraint, detainment, confiscation as per the quarantine regulations or due to the violation of any norms or regulations with regard to trade. As per the decisions of the judges in compliance with the war clauses and the hull clause, it was stated that the hull’s cover when insured, would not be at par with the capturing of the vessel. However, there is a proviso to this statement. The capturing could be justified if it was caused by battery or pricy. In the above case there was neither piracy nor battery. In fact, the claimant was completely unaware of the fact there were presence of cocaine in the vessel.
Reading the above case and examining the details of the case study, it can be concluded that the vessel B ATLANTIC was wrongly detained in Venezuela. As per the laws of Venezuela, the vessel should not have been detained by more than 2 months. The expected date was 31st October 2007, but it is still under captivity. Since the bags of cocaine were found in Venezuela, the laws prevalent in Venezuela must have been followed. Extradition laws would not be applicable here. Apart from this, the due examination and the investigation of the vessel and the parties involved, accompanied with the required evidences and witnesses were recorded by the courts. Two of them were proven guilty and convicted for the offence of trafficking of drugs and noxious substances. The claimant was not proven guilty and thus was not convicted of the same. The above reasons stated for B ATLANTIC and its immediate release from the wrongful confinement of the authorities. The detaining of the vessel was not at par with the laws of Venezuela as well. Thus, there was an urgent need for the release of the vessel which had been detained for a very long period and be put to some fruitful use.
As per the clauses of the Institute Voyage Clauses Hulls, the insurance covered a wide range of perils. After a close perusal of the perils listed there, it is observed that perils with regard to the trafficking of drugs is not covered under its arena. It is clearly stated that the insurance would not cover under its area, the malicious acts. The trafficking of drugs is an offence and can be included under the malicious acts. This is because the act of trafficking of drugs involved malice in it. the malice was stooped to the level of not letting the claimant be aware of the presence of the three bags of cocaine in the hull of the vessel.
According to the Institute War Clauses (Cargo), the insurance covered many things except, the provisions under clause 3 and clause 4 of the act. Moreover, the insurance under the War Clauses did not include damage to subject matter because of the loss or damage caused due to civil war, revolutions, political unrest and chaos in the society, armed rebellion or insurrection, any civil strife which was against the government or the commission or omission of any act towards the power of the government. It further included in this category the exclusion of detection of mines, wars or other offensive weapons. It included the exclusion of arrest, detention, seizure, confiscation or restraint or any act, which was a result of such commission. It can thus be stated from the above criteria that the Institute War Clauses did not cover the risks or the problems which B ATLANTIC was currently facing. The insurance was not covered in that arena for the securing the release of the vessel from detention under the higher authorities which had brutally kept the vessel under detention. Despite the wants of the claimant, the vessel was not released. Despite the claimant being proved as a person who was not aware of the trafficking of drugs or the claimant being a person who was not convicted of any offence, his wants were not granted by the higher authorities of law. This can be termed as gross injustice towards the owners of the vessel. All their investment had dampened and they were facing severe loss without any fault on their part. B ATLANTIC did not deserve to e considered as a Constructive total loss at any moment, but it was made to rust in the docks of Venezuela. It could not travel anywhere.
The local laws of Venezuela were for the decision of the release of the vessel after the completion of the investigation and examination procedures. They had stated that the vessel could be released by 31st October of 2007, after a detention of two months, starting from August of the same year. Soon after the completion of the preliminary examinations the vessel was bound to be released on the grounds of the decision of the local laws. But there had been the presence of political motivation which intervened in such decision. The ongoing detention of B ATLANTIC was contradictory to the local laws of the state. Thus, there was an immediate need to release the vessel and make good the loss to the owners of the vessel as soon as possible. The vessel could have been put to so other uses, instead of being labeled as a Constructive Total Loss.
After a close perusal of the above case study, it can be concluded that the verdict must include the immediate release of B ATLANTIC from the period of its ongoing detention since August 2007. It was not a Constructive Total Loss and it could be put to further use after inspection.
A premium or a certain sum of money in return of consideration.
Against such consideration, a huge amount is guaranteed to be paid by the insurer who has taken the premium.
The payment of money would be made in certain quantities of sum.
Such payment is fulfilled upon a contingent event.
Marine warranty implies the guarantee given over the goods used in the marine transportation. It is a warranty upon the ships, boats, water carriers, cargoes and other properties by mail or courier service through shipping in the seas.
The measures to prevent the breach of warranty must be efficient and must prevent all kinds of violation against the warranties. It includes those measures which would solve the problems with regard to the violation. Imposing stringent punishments and hefty compensations could be efficient in aid of breach of warranty. Understanding the terms and conditions of the warranty so that the parties are not negligent or commit any breach out of ignorance. üMaintaining that a promise needs to be performed at all costs without failure is necessary to prevent the breach of warranty from taking place. A breach of a warranty implies the violation of the terms of the warranty clauses. For this purpose, the measures that can be undertaken are the issuing of COA, regulation and monitoring of all the aspects of the procedure of warranty operation and interim reporting at every stage. There can be risk management teams for the purpose of issuing thses data. To a warranty surveyor, the site attendance holds a very important position. The site attendance includes the visiting of the particular sites at certain intervals. The sites need to be attended by every warranty surveyor to understand and possess knowledge about the site. The characteristics, structure and the exclusive features must be known to the warranty surveyor before he provides the warranty. Unless he opts for regular site attendances, he would be unaware of the functioning of the sites. Thus, he needs to be vigilant about site attendance (Vorholter, Hatecke& Feder, 2015).
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