Apparently, the concept of causation plays an integral role in compensation of the claim or a loss in marine insurance. However, it should be noted that causation theory has always been elusive when handling various cases under the law of marine insurance. The principle of indemnification as stipulated by the insurer is not applied as a way of covering against the insured loss but rather given to cover against the loss of the subject matter which has been addressed through the concept of the causally linked.
According to the Marine Insurance Act 1906 under section 55(1); it is asserted that Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he shall not be responsible for any loss which is not proximately caused by a peril insured against (Smith & Simpson, 2014, p20). The provision of this section is significant when it comes to the description and implementation of the proximate cause. The same stipulation had initially been applied by the common law. It was mainly utilized in the declaration of the liability bestowed upon the insurer to cover for the loss, which is causally linked to the peril that had been insured against.
Furthermore, the principle of the proximate cause does not support the remote or indirect cause, an act which was previously advocated by some courts. According to these tribunals, an event which is closest to the time as well as leading to damage is categorized as a cause of peril/loss (Tayari, 2015, p12). It follows that the primary purpose of the law of indemnification is to enhance accuracy on the risks to be covered by the insurer in the occurrence of the event that leads to the damage or loss.
Resicher vs. Borwick (1894) 2 QB 548, CA
Different cases have since been handled regarding maritime insurance law which can be used to expound on how the issues of the causations are treated. Resicher vs. Borwick (1894) 2 QB 548, CA is one of the cases which depicted the implementation of proximate cause principle. Under this case, the complainants had embarked on insuring the paddle identified as tug Rosa with the offenders. Apparently, both parties had agreed to comply with the marine insurance policy which was to cover for the damage/loss emanating from the collision as opposed to the hazards that were likely to be caused by the sea (Law Explorer, 2013, p2). While sailing along Danube River, Rosa wrecked with a floating snag, thus tampering with the port paddle wheel, ultimately leading to a significant damaging of the tugs machinery.
The coalition of tug Rosa encompassed development of some openings in the condenser, thus allowing the influx of water via this hole to the tug. As a way of easing the situation, the captain opted to anchor tug. The captain carried some minor repair which included the removal of the outlet pipes from the condenser, temporarily (Law Explorer, 2013, p2). The arrival of another tug allowed the towing of the tug Rosa. However, while being towed, the hole in her condenser reopened thus permitting the entry of a significant amount of water. The captain had no option but to beach and abandoned Rosa, which was the only possibility of saving lives. However, the defendants decided to compensate the plaintiffs for the immediate damage which had come from the collision hence opting to provide cover for the subsequent loss.
The court of appeal chose to rescind the decision by the trial judge thus making a ruling that favored the petitioner, who was the owner of the Rosa. According to the court of appeal, collision with the iceberg remained to be the primary cause of the losing tug Rosa. From the ruling by the tribunal of appeal, it is apparent that the principle of the proximate cause was dominantly applied (Law Explorer, 2013, p3). Various lawsuits in marine insurance are settled by this principle which asserts that an insurer can only be held liable if and only if the causally linked event was the one which was insured against, as per the details of the insurance policy. The condenser of the tug Rosa was damaged by the collision, which in this case was the ultimate cause of the loss.
Leyland vs. Norwich Union Fire Insurance Society.
Leyland vs. Norwich Union Fire Insurance Society is also another case that can be used to illustrate how the Law of Marine Insurance addresses the issue of the causation. According to this case, the ship had been insured against the dangers of the sea as stipulated by the policy which contained a warranty that covered the ship against all outcomes of the hostilities in the sea (Bulicheka, 2012, p3). Ikara was the name of this voyage ship. While she was sailing towards La Havre, Ikara was wrecked by an enemy ship. Irrespective of the damages experienced, the captain was successful in getting Ikara at the Port: La Havre. While trying to repair her, Ikara sank leading to a total loss.
After incurring the total loss on this ship, the owners of Ikara decided to file a lawsuit as a way of pushing the Norwich Union Fire Insurance Society to compensate them regarding the loss that emanated from the perils of the sea. According to the ruling by the House of the Lords, the grounding of the ship was not the direct cause of the loss but rather the damage brought by the enemy vessel (Bulicheka, 2012, p3). Apparently, it was contended that torpedoing was the proximate cause. Consequently, the ship owners failed in their pursuit to be compensated for the loss incurred through the sinking of the ship. According to the provision outlined in the policy, the policyholder had been covered against all consequences of the sea hostilities. From this case, it can be alleged that the proximate cause principle as defined under the Marine Insurance Act of 1906 under section 55(1) is not necessarily the event immediate in time to the incident that leads to a loss or damage.
From these two case examples: Resicher vs. Borwick (1894) 2 QB 548, CA and Leyland vs. Norwich Union Fire Insurance Society, it is revealed that the law of the marine insurance plays a significant role when it comes to solving various conflicts arising between the policyholder and the insurer. Apparently, the interpretation of the proximate cause remains to be an essential referencing point in ensuring that only claims for fortuitous losses that have been proximately caused by an insured peril will be indemnified.
The old-established rule of Utmost Good Faith in Insurance is a requirement that is rather more than strictly necessary. Critically examine this assertion in the light of both legislation and decided cases.
Marine Insurance Act of 1906
The principle of the utmost good faith, which is sometimes referred to as uberrimae fides in marine insurance, is a legal binding between various factions in the insurance policy. This principle requires the parties involved in the making an agreement (policy) to conduct themselves in an honest manner without misleading or concealing any information which is vital to the process of outlining the contract. The insurer and the insured are the two primary parties involved in the insurance contracts, who are under the obligations of the utmost good faith doctrine (Law Teacher, 2013, p2). From the perspective of the utmost good faith under the marine insurance; the obligation of the ship/cargo owner as specified in the contract involve making factual statements, beliefs and expectations before the insurer. It is imperative for the insured (ship-owner) to reveal all material fact present before the conclusion of the contract.
According to the provision outlined in the marine insurance act of 1906, there are some implications associated with failure to comply with the doctrine of utmost good faith. Declining to conceal or reveal everything to the insurer before the completion of the contract can make the ship-owner to be ineligible to be compensated whenever there is an occurrence of loss or damage to the ship (Lorenzo, 2014, p22). Non-disclosure of particular material fact or factual statements by the insured leads to the abandonment of the contract. This implies that the insurer is at liberty to dishonor the contract thus opting against compensating the ship-owner in the occurrence of a loss.
From the legal perspective, it can be alleged that marine insurance contracts are made on the basis of speculations. Apparently, the insurer embarks on calculating and forecasting the risk and the perils associated with an occurrence of a particular event. This will be followed by the valuations done by the insurer on whether to accept the terms of the contract or not. Accepting to abide by the provisions of the contract imply that the insurer will be liable to cover the insured against the outlined perils in the insurance policy (Mariela, 2011, p2). Once the insurer agrees to provide protection to the insured (the owner of the ship/cargo), the assured will be obligated by the terms of the contract to pay premiums. This highlights the need for having a legal binding that will ensure there is honesty and truthfulness while structuring an agreement between the two parties: the insurer and insured.
Marine Insurance Act 2015.
However, in 2015, new changes were included in marine insurance law. Apparently, the Insurance Act 2015 was passed and put into practice by August of 2016. The new amendments were meant to bring some reforms on the insurance contract law in regards to the misrepresentation and non-disclosure principles. The reforms amendments also brought changes to the warranties as well as remedies utilized in the fraudulent claims (Hodgson & Foss, 2015, p3). Before the implementations of the reforms under Marine Insurance Act 2015, the insurer was at liberty to dishonor the entire contract in the event where the insured failed to disclose every material fact before the completion of the contract. Furthermore, the undisclosed information does not necessarily need to be related to the nature of the loss.
However, in the current legislations, the insurer is allowed by the law to avoid the entire contract once it is revealed that the undisclosed information was not known to the insurer as well as the material. Section 7, under Marine Insurance Act 2015 still uses the old meaning of the materiality; which is considered to be a representation that is likely to influence the decision of an insurer when it comes to deciding on whether to agree to the demands of the policy or not (Cooper, 2015, p3). It follows that under the new marine insurance law, the insurer can only disregard the policy if it is proved that the insured failed to comply with the principle of the fair presentation. This can be deemed a deliberate or reckless act by the insured, which had the insurer known initially, he could have opted against the conclusion of the contract.
Irrespective of the new changes witnessed in the Marine Insurance Act 2015, the insurance law still thrives on the principle of the utmost good faith. Just like the common law had stipulated that marine insurance contracts are of utmost good faith, so is the new legislation. However, the distinction arises when it comes to remedies applied in solving failures to comply with this principle.
BIBLIOGRAPHY Bulicheka, 2012. LEYLAND SHIPPING CO LTD v. NORWICH UNION FIRE INSURANCE SOCIETY LTD (1918) AC 350 (HL). Case Lawyer , 3(2), pp. 2-6.
Cooper, T., 2015. The Insurance Act 2015. Thomas Cooper Law , 2(1), pp. 2-6.
Gurses, O., 2015. Marine Insurance Law. s.l.:Routledge.
Hodgson, L. & Foss, P., 2015. Insurance contract law reform. Norton Rose FulBright , 2(2), pp. 1-6.
Law Explorer, 2013. C...
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