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Maritime Insurance For The Import Export Process Part 1

1527 words - 7 pages

Marine insurance is mandated with covering the loss or damage of ships, terminals, cargo, as well as other transport or cargo by which there is transference of property either acquired or held between both points of destination and origin. The terms actual total loss and constructive total loss are used to differentiate the degree of proof where cargo or a vessel has been lost and they are defined as follows;
Actual Total Loss: occurs where the cost of repair or damages either equal or exceed the value of the property.
Constructive Total Loss: Occurs where then the cost of salvage, added to the cost of repair either equal or exceed the property’s value.
On the other hand, proximate cause is defined as the ‘dominant cause’ of the incurred loss. It can also be defined as the cause that has the most significant impact, which brings about the loss under a first party policy when two or perils that are more independent operate concurrently to result in a loss. However, courts employ a set of proximate cause rules in order to determine causation disputes especially when a policy states that it covers or excludes those losses “caused by” an insured peril, and there is more than one peril at play. The significance of the proximity cause is to determine whether the policy should cover the loss as resulted from the insured peril. From this information, it is safe to state that the insured is often the beneficiary of such a suit. This is because it is sometimes hard to prove that the peril was not the dominant factor that caused the loss. For instance in the case of Kastor Navigation Co Ltd & Another Vs Axa Global Risks (U.K) Ltd & others, it was hard for them to prove that the fire was not the dominant peril that caused the sinking of the ship.
On March 9 2000, a fire broke out in the Kastor Too’s engine room and sank 15hrs later. The ship had been insured under a slip policy whereby her agreed value was US$3 million. The perils insured against were both fire and perils of the sea. The owners of the ship insisted that the fire led to several explosions, which subsequently led to the sinking if the ship. At first, the claim was placed as an actual total loss but the insured later amended their claim for a constructive total loss. On the other hand, the insurers asserted that the ship sank because of the entry of seawater. However, before the eve of the trial, the insurers admitted that there had been an accidental fire but they argued that the fire and the entry of water were two independent events and the sinking of the ship resulted from the entry of seawater.
During the trial, the judge held that the owners’ constructive loss claim was legitimate but their actual total loss claim was futile. He agreed with the insurers that the sinking had been caused by an independent entry of water, which could not be explained. The judge found that at the time of the fire, the loss could be rendered a constructive total loss and in that effect, he awarded the...

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