14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)

The Oldest Line of Insurance

Ocean marine insurance covers ships, their cargoes, and related exposures during waterborne transit. It is the oldest line of insurance, originating with Lloyd's of London coffeehouse underwriters. Ocean marine policies are largely non-filed and unregulated as to form/rate, drawing on centuries of admiralty law and custom rather than standardized ISO forms.

Quick Answer: Ocean marine has four traditional coverages - hull, cargo, freight, and protection & indemnity (P&I).

A defining concept is insurable interest measured at the time of loss and the principle of utmost good faith (uberrimae fidei) - the insured must disclose all material facts about the voyage and vessel.

The Four Ocean Marine Coverages

Hull policies usually include a running-down clause (RDC) / collision liability covering damage the insured vessel does to another vessel. P&I picks up liabilities the hull collision clause excludes.

Marine Perils and Key Clauses

• Perils of the sea - storms, sinking, stranding, collision (fortuitous water perils, not wear or inherent vice).
• General average - voluntary sacrifice to save the venture; all parties share proportionally by value at risk.
• Particular average - a partial loss borne only by the owner of the lost property.
• Sue and labor clause - reimburses the insured for reasonable efforts to minimize a loss.
• Free of capture and seizure (FC&S) - excludes war/seizure perils (covered separately by war risk).
• Inchmaree clause - extends hull coverage to certain machinery breakdown and crew negligence.

General Average - Worked Numeric

A general-average loss is apportioned by the value each interest has at risk. Suppose to save a grounded ship the crew jettisons $100,000 of one shipper's cargo. The total values saved are: vessel $3,000,000, Cargo A $600,000, Cargo B $400,000 - a total of $4,000,000 at risk.

The contribution rate is $100,000 / $4,000,000 = 2.5%. Each interest pays 2.5% of its value:

The shipper whose $100,000 cargo was sacrificed is reimbursed $100,000 from the pooled contributions, net of its own $15,000 share - a genuine sharing of the deliberate sacrifice.

Implied Warranties in Ocean Marine

Ocean marine law imposes implied warranties even if unwritten, and breach can void coverage:

• Seaworthiness - the vessel is fit for the intended voyage and properly crewed/equipped.
• No deviation - the vessel follows the customary or agreed route without unreasonable departure.
• Legality - the venture is lawful.

Trap: An unexcused deviation from the route can suspend coverage even if the eventual loss had nothing to do with the deviation. Combined with uberrimae fidei, ocean marine imposes far stricter disclosure and warranty duties than typical property forms.

The Four Ocean Marine Coverages

Ocean marine insurance is the oldest line of insurance and covers vessels, their cargo, and related exposures on the seas and navigable waters. It is built from four principal coverages the exam expects you to name:

• Hull — physical damage to the vessel itself, including its machinery and equipment, usually written on a named-peril basis with a Running Down Clause (collision liability) that covers the insured vessel's liability for damaging another ship.
• Cargo — the goods being shipped, written open (continuous, for ongoing shippers) or per voyage, often on broad/all-risk terms.
• Freight — the revenue/income a shipowner earns for carrying cargo, lost if the voyage is not completed.
• Protection and Indemnity (P&I) — the shipowner's liability for bodily injury (crew, passengers) and property/pollution not covered by hull, functioning as the marine liability coverage.

Marine Clauses, Warranties, and Average

Ocean marine policies carry distinctive implied warranties and clauses the exam tests. Three implied warranties are read into every ocean-marine policy even if not written: seaworthiness (the vessel is fit for the voyage), no deviation (the vessel will not depart from the agreed/customary route without necessity), and legality (the venture is lawful). Breach of an implied warranty can void coverage.

Key concepts include the doctrine of average (a marine term for loss): particular average is a partial loss borne by the owner of the lost property alone, while general average is a deliberate, voluntary sacrifice (jettisoning cargo to save the ship) whose cost is shared proportionally among all parties whose property was saved — vessel, cargo, and freight owners contribute. The Free of Particular Average (FPA) clause limits the insurer's liability for partial losses, while With Average (WA) terms cover partial losses above a franchise.

Sue and Labor clauses pay the insured's reasonable expenses to minimize a loss. Knowing the four coverages (hull, cargo, freight, P&I), the three implied warranties, and the general-versus-particular-average distinction covers the most-tested ocean-marine material.