By: A.R. Henry Sitanggang
When it comes to insurance coverage, there are several commonly cited legal principles such as indemnity, insurable interest, proximate cause, etc. however, one of the most notable principles might be uberrimae fidei. Based on this principle, the insurer and the insured are bound by good faith especially when it comes to disclosing material facts.
In a marine insurance coverage, generally it is the vessel which shall protect the insured cargo from perils and thus if the cause of damage to the cargo was sea perils, the insurer shall not be held liable to compensate for the loss. In brief, if the insured is able to prove that the damage to the cargo was not caused by sea perils but due to the unworthiness of the vessel, then the insurer shall be held liable. However, the question remains, what shall be considered as sea perils might be subjective. In this case, a lot of factors might have to be analyzed e.g. the speed of wind, is there any notice or decision from particular state that the weather (in this case, the wind) in such particular time may be considered as natural causes, etc.
For instance, if a cargo of fertilizer becomes frozen at the arrival to the port of destination due to heavy wind, shall the insurer be held liable?We have also found a case in which the insured cannot recover under the extended coverage for cargo that had been deposited from lightering barges onto the shore area and was washed away as a result of rising tides and tidal waves and for other cargo that was damaged by the cyclone on shore because coverage terminated once the cargo had been delivered to “any other warehouse of place of storage” and was no longer in the “ordinary course of transit”. Clause 12 of the Institute Cargo Clauses (C) did not cover the extra charges incurred in unloading, storing and forwarding the cargo to its destination since this resulted from the closing of the discharge port, which was not a risk covered under the policy.
Based on the various cases and outcomes to the dispute in marine insurance claim, it is very important to determine the coverage of the insurance from the beginning. The principle of uberrimae fidei shall always be applied, including at the time the insurance was obtained. In a case that the cargo seller had been authorized by the cargo underwriter to issue certificate of insurance to its customers under an open cargo policy, thus it acted as the underwriter’s agent in issuing the certificates. The prediction of the rainy weather was a material fact that would have affected the underwriter’s decision whether to issue extended coverage under the policy for rainwater damage and thus had to be disclosed under the principle of uberrimae fidei. The buyer’s disclosure of the weather prediction to the cargo seller (but not to the underwriter) before coverage was extended was sufficient since the cargo seller was the underwriter’s agent, thus the extended coverage shall not be voidable based on the principle of uberrimae fidei.
Thus, in marine insurance, many factors will have to be considered to determine the coverage e.g. sea perils, seaworthiness of the vessel and of course, the principle of uberrimae fidei. If this principle was not applied, it will cause significantly to the outcome of the claim for marine insurance.