Shipping Lawyer Marine Insurance Law 2 — Questions and Answers
Question 1: What is 'average' in marine insurance terminology?
- A partial loss of or damage to the insured subject matter (Correct answer)
- The average value of all voyages insured
- A standard deductible amount
- The average premium rate for a fleet
Correct answer: A partial loss of or damage to the insured subject matter
In marine insurance, 'average' refers to a partial loss, distinguishing it from a total loss; it may be 'particular average' (single party's loss) or 'general average.'
Question 2: What does 'particular average' mean in marine cargo insurance?
- A partial loss of cargo that falls on a single interest, not shared among all cargo owners (Correct answer)
- A loss shared equally by all parties to a voyage
- An average agreed upon between the parties before the voyage
- A loss averaged across multiple voyages
Correct answer: A partial loss of cargo that falls on a single interest, not shared among all cargo owners
Particular average is a partial loss borne solely by the cargo owner whose goods were damaged, as opposed to general average which is shared by all interests.
Question 3: What is a 'franchise' deductible in marine cargo insurance?
- A threshold below which no claim is paid, but once exceeded the full loss is covered (Correct answer)
- A fixed dollar deductible subtracted from every claim
- A percentage shared between insurer and insured
- A discount on premiums for claims-free policies
Correct answer: A threshold below which no claim is paid, but once exceeded the full loss is covered
A franchise deductible sets a minimum threshold; if the loss falls below it, nothing is paid, but if the loss exceeds it, the entire loss is recoverable — unlike a true excess deductible.
Question 4: Which of the following is covered under an 'all risks' marine cargo policy?
- All accidental physical loss or damage from external causes (Correct answer)
- All losses including willful misconduct
- All losses including market depreciation
- All losses without any exclusions
Correct answer: All accidental physical loss or damage from external causes
An all-risks cargo policy covers accidental physical loss or damage from external causes, but still excludes inherent vice, delay, willful misconduct, and wear and tear.
Question 5: What are 'Institute Cargo Clauses' (ICC) and which version provides the broadest coverage?
- Standard cargo policy clauses, with ICC (A) being broadest (all risks) and ICC (C) being narrowest (Correct answer)
- Government-mandated shipping insurance terms
- Port authority cargo inspection standards
- COGSA-linked liability caps
Correct answer: Standard cargo policy clauses, with ICC (A) being broadest (all risks) and ICC (C) being narrowest
The Institute Cargo Clauses are standard marine insurance terms; ICC (A) provides all-risks coverage, ICC (B) covers named perils, and ICC (C) is the narrowest named-perils form.
Question 6: What is 'abandonment' in the context of a marine insurance constructive total loss?
- The insured's formal notice to the insurer of intention to claim a constructive total loss and transfer all interest in the vessel or cargo (Correct answer)
- The insured's decision to abandon the voyage
- The carrier's decision to jettison cargo
- The insurer's rejection of a claim
Correct answer: The insured's formal notice to the insurer of intention to claim a constructive total loss and transfer all interest in the vessel or cargo
Notice of abandonment is the insured's formal act of transferring all rights and interests in the insured property to the insurer in exchange for a full CTL payment.
Shipping Lawyer Marine Insurance Law 2
What is 'average' in marine insurance terminology?