14.4 Ocean Marine Coverages (hull, cargo, freight, P&I)

Ocean Marine Insurance

Ocean marine is the oldest line of insurance, predating standardized forms, and remains largely non-filed and manuscript - terms are negotiated between insured and insurer, often using London market wordings. It covers waterborne commerce and the vessels, cargo, and liabilities of marine ventures worldwide. Four traditional coverages make up an ocean marine program: hull, cargo, freight, and protection and indemnity (P&I).

The four ocean marine coverages

Implied warranties

Ocean marine policies impose implied warranties that the insured must satisfy even if not written in the policy. The three classic implied warranties:

1. Seaworthiness - the vessel is fit for the intended voyage and properly crewed/equipped.
2. No deviation - the vessel will not depart from the agreed or customary route without necessity.
3. Legality - the venture is lawful.

Breach of an implied warranty can void coverage, a concept distinct from most land-based property policies and a favorite exam contrast.

Perils, averages, and clauses

Key terms tested in ocean marine:

• Perils of the sea - extraordinary water-related causes (storm, sinking, stranding, collision), not ordinary wear or leakage.
• General average - a deliberate, voluntary sacrifice (e.g., jettison of cargo) for the common safety; the loss is shared proportionally by all parties (ship, cargo, freight).
• Particular average - a partial loss borne only by the owner of the lost/damaged property.
• Free of Particular Average (FPA) - excludes partial losses below a threshold; With Average (WA) covers partial losses subject to a franchise/deductible.
• Sue and labor clause - requires the insured to take reasonable steps to minimize loss; the insurer reimburses those expenses.

Worked example - general average contribution

A storm forces the captain to jettison $200,000 of cargo to save the ship. Total values at risk: vessel $3,000,000, remaining cargo $1,500,000, freight $500,000 = $5,000,000. Under general average, the $200,000 sacrifice is shared in proportion to value preserved:

• Vessel share: $3,000,000 / $5,000,000 x $200,000 = $120,000
• Cargo share: $1,500,000 / $5,000,000 x $200,000 = $60,000
• Freight share: $500,000 / $5,000,000 x $200,000 = $20,000

Each interest contributes its proportional share; the owner of the jettisoned cargo does not bear the full loss alone.

Cargo clauses and territory

Ocean cargo is commonly written under Institute Cargo Clauses (A, B, or C) - Clause A is the broadest (all-risk), C the narrowest (named major casualties). Coverage often attaches warehouse-to-warehouse, extending inland transit before and after the sea voyage. Unlike inland marine's U.S./Canada territory, ocean marine coverage is worldwide, reflecting the global nature of shipping.

Implied Warranties and Average Clauses

Ocean marine imposes three implied warranties the insured must satisfy even if unwritten - seaworthiness, no deviation from the customary route, and legality of the venture - and breach can void coverage, a sharp contrast with land-based property forms. The exam also tests the average clauses: general average is a voluntary sacrifice for the common safety shared proportionally by ship, cargo, and freight, while particular average is a partial loss borne only by the owner of the damaged property. FPA excludes small partial losses; With Average covers them subject to a franchise.

Cargo Clauses and Worldwide Territory

Ocean cargo is commonly written under the Institute Cargo Clauses, where Clause A is the broadest all-risk wording and Clause C the narrowest named-peril wording, and coverage frequently attaches warehouse-to-warehouse to include inland transit at both ends of the voyage. Unlike inland marine's U.S.-and-Canada territory, ocean marine is worldwide, reflecting global shipping. The sue and labor clause obligates the insured to minimize a loss and reimburses those expenses, a duty that parallels the mitigation requirement in property forms but is named differently here.

The Four Coverages in Practice

An ocean marine program assembles hull, cargo, freight, and protection and indemnity. Hull insures the vessel and its machinery and usually carries a running-down (collision) clause for liability to another vessel. Cargo insures the goods per voyage or under an open reporting policy. Freight protects the shipping revenue the carrier loses if cargo is not delivered. Protection and indemnity covers third-party liabilities the hull collision clause omits, such as injury to crew and passengers. A stem describing injury to a deckhand points to P&I, while damage to the ship itself points to hull.

Why Ocean Marine Is Manuscript

As the oldest line, ocean marine remains largely non-filed and manuscript, with terms negotiated between insured and insurer using London-market wordings rather than standardized state forms. This flexibility, the worldwide territory, and the implied warranties together explain why ocean marine behaves differently from the heavily standardized land-based property lines the rest of the exam emphasizes.