5 PRINCIPLES OF MARINE INSURANCE

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Marine insurance may be defined as a type of insurance where the insurer agreed to indemnify the insured against a particular financial loss or risk that may arise from water transportation.

However, marine insurance is guided by five principles, which are utmost good faith, insurable interest, indemnity, cause Proxima and subrogation

1. Utmost goods faith: This principle state that the parties to a marine insurance policy should not withhold any material information regarding the policy.

Utmost good faith imposes a greater responsibility on the insured than the insurer.

Utmost good faith means that the insured should give full and accurate information about the subject matter to be indemnified and should not fail to disclose any material fact regarding the subject of the insurance policy.

If any of the parties to a marine insurance policy do not act in good faith, then the other party has the legal to cancel the contract.

2. Insurable interest: This is another important principle of marine insurance.

As per the principle of insurable interest, the person filing for a marine insurance contract must have an insurable interest in the subject matter of the coverage he is seeking.

By insurable interest, we mean the insured should be affected by the subject matter.

In other words, he should benefit from the subject matter's safe arrival or lose out if the subject matter is lost or damaged.

It should be noted, however, that a marine insurance policy only required the insured to have an insurable interest at the time of the loss, not necessarily at the time of buying the policy. 

This is in contrast to fire and motor insurance, which required the insured to have an insurable interest both at the time of buying the policy and at the time of the loss.

Therefore, the marine insurance policyholder might not have an insurable interest at the time of acquiring the policy, but it is expected that the holder will have an insurable interest at the time of the loss.  if not, he may not be entitled to company.

3. Indemnity: According to this principle, the insured should be compensated for any loss or damage to the subject matter to the extent of the loss incurred.

It means that the insurer should reinstate the insured in the position he was before the loss occurs.

For adequate indemnification, the monetary value of the subject matter is usually estimated at the time of taking the policy. 

But sometimes the value may be calculated at the time of loss, as is with the case of an unvalued insured policy.

The principle of indemnity ensures that the insured does not profit from insurance coverage as he is only compensated to the extent of the loss, and not more than the loss suffered.

4. Causa Proxima: Causa Proxima is the Latin word for nearest or proximate cause.

According to this principle, when a loss occurs, the insured must consider the proximate cause.

This will help in identifying the real cause of the loss when a large number of factors have contributed to the loss.

In essence, causa Proxima states that if a marine insurance policyholder suffers a loss arising from several factors, he will only be compensated if the insured peril is the proximate cause of the loss

If the proximate cause of the loss is not the insured peril, then the insurance company is not legally bound to pay any compensation.

5. Principle of subrogation: This principle of marine insurance is closely related to the principle of indemnity.

As per this principle, the insured cannot profit from the damaged property for which he has received compensation.

To illustrate, suppose the policyholder's goods in transit were damaged, and he suffer losses amounting to €500,000.

The Marine insurance then compensates the policyholder for the amount. If the policyholder decides later to sell the damaged goods for €50,000, then the policyholder has to pay the insurance company the €50,000.

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