Insurance policies also apply to loss during marine transport. There is a valued marine policy for it. It is a type of marine insurance that marks a certain value for the insured property. It could be a cargo of a shipping vessel or anything else. If the matter is genuine then the valued marine policy pays for the loss. It is different from open and unvalued marine policy. These two require the customers to prove the worth of the property. You can show invoices or any other form of evidence. Here, we will take you through valuation by services in the marine loss. It will give you an insight into the various conditions and benefits associated with it.
Provisions In Valuation By Services.
Few things like hemp, sugar, tobacco, hides, and skins are warranted free from the particular average. The condition applies only unless the ship is stranded. A similar condition applies to fish, flour, salt, and seed too. The stranding of the ship is responsible for vitiating the memorandum. It also makes insurers liable for any particular average that occurs on the voyage. They are liable irrespective of the franchises mentioned.
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If the particular average value reaches the state percentage, the insurer is liable for paying for the whole loss. The insurer cannot step back merely by using a franchise or exemption limit. You can only claim for the particular average loss if it exceeds a fixed percentage of the total value of goods. If the insurance is of a huge amount, even this fixed percentage will result in a huge amount. In such cases, the assured faces great hardship. He has to suffer this partial loss on his own.
So what can be done to lessen the rigors of the memorandum clause? One solution is a division of subject matter into sections known as series and franchise. This means they consider exemption limit separately for each series. This phenomenon helps in the calculation of a particular average loss. It is important to note that subject matter may vary depending on interest, or other factors. In the end, if the last series doesn’t fulfill the required limit we call it tail series. This is how different the valuation by services in marine loss works.
What’s The Particular Average On Ship?
In case of partial loss of ship, the factors that the companies consider are:
The assured has to pay the reasonable cost of repair where the ship’s repair procedure takes place. The amount doesn’t include the customary deductions. Another point to note is that the amount of repair must not exceed the sum insured.
Another instance could be where the ship requires partial repair. Here, the assured is responsible to pay the cost of repair and depreciation.
It may happen that the ship has not been repaired. Instead, it is sold in its damaged state. In such a case, the assured is responsible to receive compensation for the reasonable depreciation.
The amount of indemnity for a particular average is actually the reasonable cost of damage repair. It doesn’t include customary deductions and you get new for old. But yes, after the addition of new parts, the value of old parts is deducted to find the difference. Insurance companies are liable to pay for the repair cost of particular average damage. This doesn’t have any relation to the insured or actual value of the shop. Insurers need to pay for temporary repairs along with permanent repairs.
If the company cannot repair ship at the port of refuge they shift it to another port. In such a case, the cost of the transfer comes under the cost of repair only. Also, additional expenses that come with over-time working do not come under it. So the valuation by services in marine loss is quite different.
What’s Particular Average In Case Of Freight?
If there is a partial loss of freight, the calculation of indemnity is different. It could be the proportion of the sum that has fixed value in the valued policy. Another way could be the calculation of insurable value in the case of an unvalued policy. It is the proportion of freight lost to the whole freight at the risk of assured.
General Average Loss Vs Particular Average Loss
- The particular average is in connection with specific interests while in general, the connection is with all interests.
- The particular average is on the accidental side while the general average is mostly intentional and voluntary.
- With general average has its share coming from multiple sources that benefit from it. In the case of a particular average only insurer pays it.
- Particular is the result of loss or damage while in the case of general average it includes expenditure too.
Kinds Of General Average Loss
There are two different divisions of General Average Loss.
General Average Expenditure: In case of general average expenditure, there is the involvement of extra expenditures for safety. Here, there are additional charges wherever the ship is repaired. For example, lighting and re-loading charges of the cargo.
Read Also: Here Are 12 Major Types Of Marine Insurance Policies!
General Avenge Sacrifices: This is another division that is made for the common safety. It involves throwing away jettison to reduce the weight of the ship.
Final Words
Under maritime law, salvage charges are recoverable by a salvor. The law works independently of the contract. Salvors voluntarily or independently render services to rescue property at sea. So salvage charges are a form of reward for them. If salvors claim rewards for the services that are unsuccessful they won’t get anything. Here, we gave you information on a valuation by services in the marine loss.
The actual distinction between valued and unvalued policies first came into the picture in 1906. Marine insurance act clearly states it. And it is the real basis of maritime insurance policies and laws in most of the countries. It is true that a particular average is a new term for you. These terms come into picture in the marine loss. Marine insurance is quite different from other insurance policies. Both in terms of conditions and clauses. In case of doubts or queries, you can send us your queries through comments. We will get back to you as soon as possible.
