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According to the Marine Insurance Act:

A contract of marine insurance is an agreement whereby the insurer
undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure.

Now in the above definition we have few important words which we should know before we go any further. These words are:

1. Insurer: the company or the person from whom the insurance has been taken.
2. Assured: the company or the person who has taken the insurance.
3. Marine Adventure: includes an adventure where

(i) any insurable property is exposed to maritime perils;
(ii) the earnings or acquisition of any freight, passage money, commission, profit or other pecuniary benefit, or the security for any advances, loans, or disbursements is endangered by the exposure of insurable property to maritime perils;
(iii) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property by reason of maritime perils

4. Indemnify: means to compensate.

Marine Insurance is mainly of 3 types:-

1. hull and machinery insurance.
2. cargo insurance
3. freight insurance

we will discuss these 3 in detail in our next post.

Now the most important question is what are the “PRINCIPLES OF MARINE INSURANCE”. They are:

1. Principle of utter most good faith: This means that the assured will disclose correct information about the policy and the subject insured. If it was found that the information is not correct or there are things that the assured has concealed then the policy provider can cancel the policy even if this comes to light at the time of claim.
2. Principle of insurable interest: this simply means that the assured must have something to gain by the survival of the subject matter and may incurred loss if the subject matter is damaged. Assured may not have insurable interest at the time of buying the policy but expect to get such interest in future.
3. Principle of Indemnity: this is the most important principle which states that the insurer must compensate the assured to the extent of the loss.
4. Principle of Proxima Cause: At the time of loss, the marine insurance policyholder would consider the nearest or proximate cause, which would help in deciding the actual cause of loss when there would be a series of causes which have attributed to the loss. Here, remote cause for a loss is not required to determine the liability and therefore, if the proximate cause is insured, the marine insurance company has to settle the claim.
5. Principle of Loss Minimization: This means that the assured should take every precaution to minimize the loss.
6. Principle of Contribution: This means that if an assured has taken an insurance from two or more companies then these insurer will pay the compensation in the proportion in which the amount i paid to these companies.
7. Principle of Subrogation : this means that once the insurer has paid for the assured for the loss, all the right of the subject matter goes to the insurer.

NOTE: PRINCIPLE OF CONTRIBUTION AND PRINCIPLE OF SUBROGATION WILL BE DISCUSSED IN DETAIL IN FUTURE POST.