Key Takeaways
- Ocean marine is the OLDEST form of insurance—dating back to ancient maritime trade and Lloyd's of London in the 1600s
- Four main coverages: HULL (the vessel), CARGO (goods shipped), FREIGHT (shipping charges), and P&I (liability)
- PERILS OF THE SEA include storms, sinking, stranding, collision, and piracy—but NOT normal wear and tear or inherent vice
- GENERAL AVERAGE requires all parties (ship owner, cargo owners) to share losses when cargo is jettisoned to save the vessel
- The SUE AND LABOR clause requires the insured to take reasonable steps to minimize loss and the insurer pays those costs
Ocean Marine Insurance
The Oldest Form of Insurance
Ocean marine insurance is the oldest form of commercial insurance, dating back to ancient maritime trade. Lloyd's of London, established in the 1680s, began as a coffeehouse where merchants gathered to insure ships and cargo.
Quick Answer: Ocean marine covers vessels, cargo, and shipping-related liabilities for international maritime commerce. It includes four main coverages: hull (the ship), cargo (goods), freight (shipping charges), and P&I (liability).
The Four Main Ocean Marine Coverages
1. Hull Insurance
What It Covers: The vessel itself—the ship, boat, or barge.
| Coverage Element | Details |
|---|---|
| Hull and machinery | Ship's structure and equipment |
| Running down clause | Liability for collision with another vessel |
| Salvage charges | Cost to save the vessel |
| General average contribution | Ship owner's share of sacrificed cargo |
2. Cargo Insurance
What It Covers: Goods being shipped by sea.
- Covers physical damage and loss to cargo
- May be voyage-specific or open (blanket) policy
- Values often declared per shipment
- Covers from "warehouse to warehouse"
3. Freight Insurance
What It Covers: Shipping charges that would be lost if cargo doesn't arrive.
- If cargo is lost, shipper loses the freight charges
- Protects the shipper's revenue
- Often combined with cargo coverage
4. Protection and Indemnity (P&I)
What It Covers: Maritime liability coverage.
| P&I Covers | Examples |
|---|---|
| Injury to crew members | Seaman injuries, Jones Act claims |
| Injury to passengers | Cruise ship accidents |
| Damage to docks/piers | Collision with fixed objects |
| Pollution liability | Oil spills, environmental damage |
| Cargo liability | Damage to cargo in carrier's care |
Key Ocean Marine Concepts
Perils of the Sea
Covered Perils:
- Storms and heavy weather
- Sinking and stranding
- Collision with other vessels
- Piracy and theft
- Fire and lightning
- Jettison (throwing cargo overboard)
NOT Covered:
- Normal wear and tear
- Inherent vice (goods that spoil naturally)
- Delay (unless specified)
- War (requires separate coverage)
General Average
Definition: When cargo is voluntarily sacrificed to save the ship, ALL parties (ship owner and cargo owners) share the loss proportionally.
Example:
- Ship in distress, some cargo thrown overboard to save the vessel
- ALL cargo owners share the loss, not just those whose cargo was jettisoned
- General average is calculated and apportioned by an average adjuster
Sue and Labor Clause
Requirement: The insured must take reasonable steps to minimize loss, and the insurer will pay those costs in addition to the claim.
Example:
- Cargo ship runs aground
- Insured hires salvage company to recover cargo
- Sue and labor clause pays salvage costs beyond the coverage limit
Under general average, what happens when cargo is jettisoned (thrown overboard) to save a ship?
Which ocean marine coverage protects against liability for oil spills, crew injuries, and damage to docks?
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