Marine Insurance Clauses

Geoffrey Hudson, Tim Madge, Keith Sturges

• Publisher: Informa Law from Routledge
• Year: 2013
• ISBN:
  9781317984474
• Edition: 5
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

The new edition of Marine Insurance Clauses reflects numerous changes and additions to the policy clauses, and particularly the new style of the organisation entitled the International Underwriting Association of London in 2002. The new edition will bring you up to date with the present complex and sometimes confusing variations in policy conditions.

Part of the Maritime and Transport Law Library.

Part I
Introduction to the Fifth Edition

1. Whatever Happened to the Quiet Revolution?

In the first edition of this work the authors celebrated the introduction in January 1982 of a new set of marine insurance policy forms to cover cargoes worldwide. They were designed to stand on their own, without the panoply of Lloyd’s SG form of policy to encumber their wording and bewilder the minds of their readers.

These were the Institute Cargo Clauses, demurely titled (A), (B) and (C), to which was added, as customary, the date of origin (1/1/82).¹ They were followed, in short order, by Institute Clauses for particular commodities² and a new version of the standard form for the insurance of ships, the Institute Time Clauses, Hulls, 1/10/83.³

The trigger for this intellectual activity on the part of the London insurance market was a document published in November 1978 by the Secretariat of the United Nations Conference on Trade and Development (UNCTAD) with the title Marine Insurance—Legal and Documentary Aspects of the Marine Insurance Contract.⁴ As stated in the Introduction to the first edition of this book, the UNCTAD report recognised the ascendancy of the United Kingdom as "the international market centre of marine insurance" and subsequently concentrated the major part of its investigatory activity on an analysis of the English marine insurance regime, bestowing in the process bouquets and brickbats with even-handed largesse.

In consequence of this groundswell for reform, Lloyd’s Underwriters’ Association and members of the Institute of London Underwriters, working through a system of joint committees,⁵ instituted a review of the important policy forms in daily use. Thus began the process which the then authors of this book dubbed "The Quiet Revolution".

Twenty years later, another milepost was recorded. The Institute of London Underwriters ceased to be, in its place a new body with a different constitution—the International Underwriting Association of London. In 2002, under the aegis of this new organisation, a radically different set of standard insurance conditions for ships emerged—the International Hull Clauses. Hence also a change in the title, from The Institute Clauses to Marine Insurance Clauses, of the fourth edition of this book in which the new hull clauses were examined in detail.

The changes accomplished in the revolution of 1982, including the banishment of Lloyd’s SG form to the archives, the rephrasing of the Perils Clause, the abolition of the Memorandum and the renaming of the old Sue and Labour Clause as the "Duty of Assured Clause" have now all become commonplace but, it might be asked, how have these changes been received in the market-place?

Well, it would seem that the new cargo forms were welcomed and remained unchanged for 27 years until their revision in 2009. Even then, the revision was largely cosmetic, with occasional words or phrases being changed to add clarity, though in several respects the cover was made more advantageous to the assured. The same cannot be said for the succession of so-called standard hull forms, with which shipowners and their advisers have had to contend since 1983. First came the Institute Time Clauses, Hulls, 1/10/83, which was considered a praiseworthy advance on the forms of 1969 and 1970 (the forms which introduced the "each accident" deductible). This was followed by the Institute Time Clauses, Hulls, 1/11/95, which was universally condemned for its attempts to introduce excessively hard and restrictive conditions. Both these forms were discussed in the third edition of this book and are also commented on in this fifth edition.

Then, new millennium—new approach, and after a great deal of research and rethinking the Joint Hull Committee launched the International Hull Clauses. This form was first issued on 1/11/02, but was not intended to be taken up and put into immediate effect. On the contrary, it was intended to be considered as a consultative document, and accordingly, after an unprecedented orgy of interorganisational discussion, involving shipowners, managers, brokers and average adjusters, the new form was re-presented to clients a year later to the day. The International Hull Clauses of 1/11/03, extensively analysed and examined both in the fourth edition and herein,⁶ have failed to receive the degree of acceptance which, in the authors’ opinion, they undoubtedly deserve. Shipowners, as the authors have found in their professional experience, are commendably cautious and conservative in their approach to such matters as marine insurance, and even today they prefer the ITC of 1/10/83 or even the American Institute Hull Clauses of 2 June 1977. The reasons for this will hopefully become apparent from a reading of Part III of this book, which deals with marine hull forms.

1. For the commentary on the 1/1/09 clauses, see pp.12–50.

2. Commentary on pp.50–78.

3. Commentary on pp.87–88.

4. UNCTAD document TD/B/C14/ISL/27.

5. In particular the Joint Cargo Committee, the Joint Hull Committee, and the Technical & Clauses Committee.

6. See commentary on pp.90–187.

2. The Formal Policy Documents

With the abolition of Lloyd’s SG form of policy, it was necessary to create a new formal document of contract. It was decided to do this in the simplest possible form of words consistent with the need to validate the existence of the contract and comply with the provisions of the Marine Insurance Act 1906.

Section 22 of the Marine Insurance Act provides:

"Subject to the provisions of any statute, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act. The policy may be executed and issued either at the time when the contract is concluded or afterwards."

Section 23 used to set out a number of matters which the policy must specify by law, but now requires merely that the policy should specify the name of the assured, or of some person who effects the insurance on his behalf.⁷

Section 24(1) of the Act provides:

"A marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal."

The new form of document was issued concurrently by both Lloyd’s and the Institute of London Underwriters in terms which were practically identical. The wording of this document in the Companies’ Marine Policy form was:

"We, the Companies, hereby agree, in consideration of the payment to us by or on behalf of the Assured of the premium specified in the Schedule, to insure against loss damage liability or expense in the proportions and manner hereinafter provided. Each Company shall be liable only for its own respective proportion.

This insurance shall be subject to the exclusive jurisdiction of the English Courts, except as may be expressly provided herein to the contrary.

In Witness whereof the General Manager and Secretary of the Institute of London Underwriters has subscribed his name on behalf of each Company."

There then followed a space for the formal signature and stamping of the policy, together with the caveat that the policy would not be valid unless it bore the embossment of the Policy Department of the ILU.

Both this form and the Lloyd’s form in similar terms were known as the MAR forms, and from 1991 they were so indicated by the logo MAR 91. On the reverse, or attached to the MAR form, there is a Schedule in printed form which enables the document to record the main details of the insurance contract, as shown on page 5. Indeed, since its inception the MAR form has been used as a kind of standard marine insurance policy "in blank", to which the parties may attach such special conditions as suit the circumstances.

For example, in Shell UK Ltd v CLM Engineering Ltd,⁸ a substantial insurance contract relating to a multi-million pound construction project in the North Sea had been set out in the framework of the MAR form. The learned judge pointed out that the MAR form now effectively replaced the SG form, and that this therefore enabled him to approach the policy as one being primarily designed to cover physical losses to insurable property caused by insured perils. Thus all the elements were present to enable him to solve what was basically a marine insurance problem, notwithstanding that the problem concerned the success or failure of an underwater engineering project.

“This insurance shall be subject to the exclusive jurisdiction of the English Courts . . .”

This paragraph was inserted in the MAR form 1991 with the object of requiring an assured who wishes to sue on the policy to institute legal proceedings in England. The previous form of words—"This insurance is subject to English jurisdiction" —had been held not to constitute an exclusive jurisdiction clause, and to be merely declaratory, for the benefit of an assured, who might be foreign, that the rights which he had under the policy were capable of enforcement in the English courts.⁹

The inclusion of this clause in the MAR form may be contrasted with the provision contained in each of the various London market Clauses which we shall examine later in this book, to the effect that the insurance is "subject to English law and practice". The reason for this is that, whereas the MAR forms will only be used when the contract is concluded in the United Kingdom, the Institute Clauses may also be used in conjunction with a policy of insurance issued abroad specifically providing for jurisdiction, exclusive or otherwise, in the country of issue.

On the back page of each MAR form is the Schedule to which we have already referred.

As revealed in Chapter 1, the London insurance market went through a number of organisational changes, beginning in 1998 with the dissolution of the Institute of London Underwriters and its replacement by a new body, the International Underwriting Association of London, which thereupon became responsible for the issuance of companies’ policies of insurance under a new form of cover. Some time after this, in 2001, and looking even further forward to the future, another new entity was formed, in which was to be consolidated all the policy-issuing functions of the London market. The policy issuing authority of the International Underwriting Association of London was accordingly closed in favour of ins-sure Services Limited (no—this is not a misprint) on 1 March 2003. Its standard Marine Policy form is set out on page 6.

Another, perhaps more significant change has r...