The nature of fishing vessels and their operations gives rise to a wide variety of risks and exposes the vessel and those that run the vessel to a number of different types of losses. Marine hull insurance being one of the oldest types of insurance has the purpose of limiting such risks and such losses, and is a means by which vessel owners can to a degree manage their risk.
Recent experience has indicated that sometimes vessel owners, their brokers and indeed the insurers are at odds as to what the insurance policy actually covers and how certain of the terms are to be interpreted. The general rule is that if the policy wording is ambiguous it should be interpreted in favour of the insured. But one shouldn’t have to get to this point if the process is started correctly.
The intermediary who deals with the insurer is your broker and this is the person who consults with you, assesses your needs and obtains quotes from various insurers which are then presented to you for decision.
The experience of the broker in your particular industry is of vital importance and as such choosing the correct broker is likewise a pivotal decision in making sure you cover the hull risk of your business as best possible and at a reasonable premium.
Often brokers present a cryptic schedule with references to clauses and terms of cover which are not actually contained in the schedule or to any attached document. In those circumstances insist on the full policy wording before deciding on the insurance or at least ask pointed questions as to the cover which is being promised.
In the fishing industry, the clauses most often incorporated into policies are the institute fishing vessel clauses which form part of the standard policies of the International Underwriting Association of London often referred to as “institute clauses”. These clauses when read together with the English Marine Insurance Act of 1906 set out the ambit of your hull cover.
However, these clauses at times are not easy reading and it is important for you to understand what exactly is being covered. This is particularly so when often there are exclusions referred to in the policy schedule which are very briefly written and can be misleading.
One of the first and most obvious questions is: what is the cover of the policy (and in insurance terms what are the insured perils)? The institute clauses generally set out the main cover under 2 categories: firstly, the perils which are covered by the underwriter irrespective of a want of due diligence by the assured – it doesn’t matter if the insured has been negligent ; and secondly, the so called “Inchmaree cover” which covers perils insured only if the assured has no want of due diligence – there is no cover if the insured is negligent.
the first category covers the following perils:
- Perils of the seas, rivers, lakes or other navigable waters – the simple action of wind and wave which gives rise to wear and tear is not covered under this peril. What is covered is fortuitous or unexpected eventualities eg extraordinarily heavy weather. Cover under this peril is regardless of whether the assured or its servants have been negligent.
- Fire and explosion – this cover is in place regardless of the negligence of the assured, assured servants or any third party;
- Violent theft by persons from outside the vessel;
- Breakdown of or accident to nuclear installations or reactors;
- Contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation;
- Earthquake, volcanic eruptions or lighting;
The second category being the inch Maree perils only provide cover if there was no want of due diligence from the insured. These perils are briefly as follows:
- Accidents in loading, discharging or shifting catch, fuel or stores;
- Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull (ie machinery breakdown);
- Negligence of master, officers, crew or pilots – this cover applies even if for instance a master who was negligent owns shares in the vessel;
- Negligence of repairers or charterers provided such repairers or charterers are not an assured under the policy;
- Barratry of masters, officers or crew – this is the willful or intentional causing of harm to the ship owner by the master, officers or crew.
There is also other miscellaneous cover under the institute clauses such as:
- Pollution Hazard cover;
- General average and salvage under certain conditions;
- Wages and maintenance of crew during the period of repairs;
- Sue and labour cover for expenses incurred by the insured to try minimize loss;
- Collision liability – this is liability of the insured to third parties arising from a collision (subject to certain exclusions);
- Certain protection and indemnity cover for liability to third parties;
Along with enquiring from your broker exactly what is covered by the policy, the next important query is to ask what exclusions to cover there may be. It should be insisted that these exclusions are made clear in the policy wording and/or the quote before you accept the cover offered.
In addition, one should ask whether there are any warranties in the policy which are given by the insured to the insurer particularly regarding seaworthiness of the vessel and/or compliance with maritime legislation. One does not want a strict warranty in your policy which the insurer can rely on to void the policy even though the subject matter of the warranty is not related to the cause of loss.
Finally make sure that you know what law is applicable to the policy and what is the dispute resolution mechanism applicable. It must be a mechanism that is convenient and affordable for the insured.
In fact nowadays it would be prudent for both the insured and the insurer in fact to agree an arbitration clause in the policy which allows for local arbitration in South Africa and preferably agreed maritime arbitration – which is about to be launched in South Africa where experienced maritime lawyers are used as arbitrators in maritime matters without the need for lengthy court proceedings.
In a fishing operation a fishing vessel is one of the major assets of the business and is the asset which is placed in the most dangerous position almost on a daily basis. Knowing that you have the correct cover in place is therefore paramount to any business owner. So when renewing or placing cover over one’s vessels, set aside a specific time every year where you can meet with your broker and other operational staff within your business to discuss and agree on the type of cover you require so that there is no misunderstanding when a claim arises in the future.