Maritime Law Marine Insurance Law 2 — Questions and Answers
Question 1: The 'Institute Cargo Clauses (A)' provide the broadest cargo coverage because they use which coverage basis?
- All risks of loss or damage (Correct answer)
- Named perils only
- Total loss only
- Particular average with a franchise deductible
Correct answer: All risks of loss or damage
ICC (A) clauses cover all risks of physical loss or damage to the cargo subject to standard exclusions, making them the widest standard cargo coverage available.
Question 2: In marine insurance, 'general average' requires all parties sharing in a maritime venture to contribute to:
- Losses deliberately incurred to save the venture from a common peril (Correct answer)
- The shipowner's hull repair costs after a storm
- Port dues and pilotage costs for a refuge port call
- Crew wages during a voyage delay caused by machinery failure
Correct answer: Losses deliberately incurred to save the venture from a common peril
General average is the principle that all parties (ship, cargo, freight) must contribute proportionally to extraordinary sacrifices or expenses made to save the whole venture from a common peril.
Question 3: Under U.S. law, which Act governs the general average obligations for voyages to or from the United States?
- York-Antwerp Rules (incorporated by contract) and the U.S. Carriage of Goods by Sea Act (Correct answer)
- The Harter Act of 1893 exclusively
- The Shipping Act of 1984
- The Longshore and Harbor Workers' Compensation Act
Correct answer: York-Antwerp Rules (incorporated by contract) and the U.S. Carriage of Goods by Sea Act
General average in U.S. practice is typically governed by the York-Antwerp Rules as incorporated into the bill of lading or charter party, alongside COGSA provisions.
Question 4: A 'constructive total loss' (CTL) in marine insurance arises when:
- The cost of repair or recovery exceeds the insured value of the vessel (Correct answer)
- The vessel sinks in waters deeper than 100 meters
- The vessel is missing for more than 3 months
- The hull suffers damage to more than 50% of its structural members
Correct answer: The cost of repair or recovery exceeds the insured value of the vessel
A CTL occurs when the vessel is not an actual total loss but the cost of recovering or repairing it would exceed its insured value, making it commercially a total loss.
Question 5: When a marine insurer pays a total loss claim, it acquires the insured's rights against third parties through:
- Subrogation (Correct answer)
- Abandonment
- Assignment of proceeds
- Novation of the contract
Correct answer: Subrogation
Subrogation allows the insurer who has paid a loss to step into the insured's shoes and pursue recovery from the party responsible for the loss.
Question 6: The 'sue and labour' clause in a marine policy obligates the insured to:
- Take reasonable steps to minimize or prevent a covered loss, with costs reimbursed by the insurer (Correct answer)
- File suit against the carrier within 12 months of loss
- Hire a professional salvor immediately upon grounding
- Report all near-misses to the insurer within 48 hours
Correct answer: Take reasonable steps to minimize or prevent a covered loss, with costs reimbursed by the insurer
The sue and labour clause requires the insured to take all reasonable measures to avert or minimize a loss, and the insurer reimburses reasonable expenditures incurred in doing so.
Maritime Law Marine Insurance Law 2
The 'Institute Cargo Clauses (A)' provide the broadest cargo coverage because they use which coverage basis?