CMI CMI Marine Insurance & Casualty Assessment 1 — Questions and Answers
Question 1: In the context of marine insurance, a 'particular average' refers to:
- A partial loss that affects only specific interests, not shared by all parties to the voyage (Correct answer)
- A loss shared proportionally among all cargo owners and the shipowner
- The average daily operating cost of a vessel during an investigation
- A USCG penalty assessment applied to a specific vessel owner
Correct answer: A partial loss that affects only specific interests, not shared by all parties to the voyage
Particular average is a partial, accidental loss or damage borne solely by the affected interest, contrasted with general average, which is shared by all parties.
Question 2: Which document formally declares a vessel to be a constructive total loss in US marine insurance practice?
- A Notice of Abandonment submitted by the shipowner to the insurer (Correct answer)
- A USCG Marine Casualty Report (CG-2692)
- A Certificate of Seaworthiness issued by the classification society
- A Protest of Sea recorded before a notary public
Correct answer: A Notice of Abandonment submitted by the shipowner to the insurer
A Notice of Abandonment is the formal tender by which a shipowner transfers ownership of a damaged vessel to the insurer in exchange for a total loss payment.
Question 3: A CMI investigator assisting with a marine insurance claim would most likely be asked to determine:
- Whether the loss arose from a covered peril and the proximate cause of the casualty (Correct answer)
- The market value of the vessel at the time of its original purchase
- Whether the vessel's crew holds current STCW certification
- The insurance company's financial solvency rating
Correct answer: Whether the loss arose from a covered peril and the proximate cause of the casualty
Marine investigators assist insurers by establishing causation and whether the loss falls within the policy's covered perils, which is central to claim evaluation.
Question 4: Under the principle of subrogation in marine insurance, after paying a claim the insurer:
- Acquires the right to pursue recovery from the party legally responsible for the loss (Correct answer)
- Transfers the policy to a secondary insurer for future claims
- Relinquishes all further interest in the vessel and its operations
- Is required to notify USCG of the claim settlement within 30 days
Correct answer: Acquires the right to pursue recovery from the party legally responsible for the loss
Subrogation allows the insurer, having compensated the insured, to step into the insured's shoes and seek recovery from the negligent third party.
Question 5: The term 'sue and labor' clause in a marine insurance policy requires the insured to:
- Take reasonable steps to minimize or prevent further loss after a casualty occurs (Correct answer)
- File suit against the responsible party within 12 months of the incident
- Labor aboard the vessel during any salvage operation directed by the insurer
- Sue any third party identified in the CMI investigation report
Correct answer: Take reasonable steps to minimize or prevent further loss after a casualty occurs
The sue and labor clause obligates the insured to act to minimize loss, and costs incurred in doing so are typically recoverable under the policy.
Question 6: A 'P&I Club' in the maritime industry primarily provides insurance coverage for:
- Third-party liabilities such as crew injury, cargo damage, and pollution claims (Correct answer)
- Hull and machinery damage to the vessel itself
- Loss of freight revenue during a vessel's off-hire period
- Port authority fees and pilotage expenses
Correct answer: Third-party liabilities such as crew injury, cargo damage, and pollution claims
Protection and Indemnity (P&I) Clubs are mutual insurers covering shipowners' liabilities to third parties, including personal injury, cargo damage, and oil pollution.
CMI CMI Marine Insurance & Casualty Assessment 1
In the context of marine insurance, a 'particular average' refers to: