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IC Sec 1960-1997 Loss in Marine Insurance (THE MARINE CONTRACT)
1960. A loss is either total or partial.
1961. A total loss is either actual or constructive.
1962. An actual total loss is caused by:
(a) A total destruction of the subject matter of insurance.
(b) The loss of the subject matter by sinking, or by being broken
(c) Any damage to the subject matter which renders it valueless to
the owner for the purposes for which he held it.
(d) Any other event which entirely deprives the owner of the
possession, at the port of destination, of the subject matter.
1963. A constructive total loss is one which gives to a person
insured a right to abandon, under section 1971.
1964. An actual loss may be presumed from the continued absence of
a ship without being heard of. The length of time which is
sufficient to raise this presumption depends on the circumstances of
1965. When a ship is prevented, at an intermediate port and by the
perils insured against, from completing the voyage, the master shall
make every exertion to procure, in the same or a contiguous port,
another ship for the purpose of conveying the cargo to its
destination. The liability of a marine insurer on the cargo
continues after it is thus reshipped and such insurer is additionally
liable as prescribed in section 1966.
1966. In addition to the liability mentioned in Section 1965, a
marine insurer is liable, up to the amount insured, for damages,
expenses of discharging, storage, reshipment, extra freightage, and
all other expenses incurred in saving cargo reshipped pursuant to
1967. Upon an actual total loss, the insured is entitled to payment
without notice of abandonment.
1968. Where it has been agreed that an insurance upon a particular
subject matter, or class of subject matter, is to be free from
particular average, a marine insurer is not liable for any particular
average loss not depriving the insured of the possession, at the
port of destination of the whole of such subject matter or class,
even though the subject matter or class becomes entirely worthless;
but such insurer is liable for his proportion of all general average
loss assessed upon the subject matter insured.
1969. When insurance is confined in its terms to an actual total
loss, it does not cover a constructive total loss, but it does cover
any loss which necessarily results in depriving the insured of the
possession, at the port of destination, of the entire subject matter
1970. Abandonment, in marine insurance, is the act of the insured
by which, after a constructive total loss, he declares the
relinquishment to the insurer of the insured's interest in the
1971. In marine insurance, after abandonment of the subject matter
of insurance or of any particular portion thereof which is separately
valued by the policy or otherwise separately insured, in a case
where the cause of the loss is a peril insured against the insured
may recover for a total loss, as described in section 1963, if:
(a) More than half in value of the subject matter is actually lost
by such peril, or would have to be expended to recover it from the
(b) The subject matter is injured to such an extent as to reduce
its value more than half.
(c) The subject matter is a ship, and either the contemplated
voyage can not be lawfully performed without incurring either an
expense to the insured of more than half the value of the ship
abandoned or a risk which a prudent man would not take under the
(d) The subject matter is cargo or freightage and the voyage can
not be performed, nor another ship procured by the master to forward
the cargo, within a reasonable time, with reasonable diligence and
without incurring an expense to the insured of more than half the
value of the subject matter or a risk which a prudent man would not
take under the circumstances. But freightage can not in any case be
abandoned unless the ship also is abandoned.
1972. An abandonment can not be either partial or conditional.
1973. An abandonment can be made only at a time limited by all of
(a) Within a reasonable time after the information of the loss.
(b) After the commencement of the voyage.
(c) Before the insured has information of the completion of the
1974. Where the information upon which an abandonment has been made
proves incorrect, or the subject matter of insurance is so far
restored when the abandonment is made that there is in fact no total
loss, the abandonment is not effective.
1975. Abandonment is made by giving oral or written notice thereof
to the insurer.
1976. A notice of abandonment shall be explicit, and shall specify
the particular cause of the abandonment, but need state only enough
to show that there is probable cause therefor, and need not be
accompanied with proof of interest or of loss.
1977. An abandonment can be sustained only upon the cause specified
in the notice thereof.
1978. An abandonment is equivalent to a transfer to the insurer of
the insured's interest, with all the chances of recovery and
1979. Whenever a marine insurer pays for a loss as if it were an
actual total loss, he is entitled to whatever remains of the subject
matter insured, or its proceeds or salvage, to the same extent as in
the case of a formal abandonment.
1980. Upon an abandonment, acts done subsequent to the loss and in
good faith by persons who at the time were the insured's agents in
respect to the subject matter insured, are at the risk of the
insurer, and for his benefit.
1981. An acceptance of an abandonment is not necessary to the
rights of the insured, and is not to be presumed from the mere
silence of the insurer at the time of receiving notice of
1982. The acceptance of an abandonment, whether express or implied,
is conclusive upon the parties and admits the loss and the
sufficiency of the abandonment.
1983. An abandonment once made and accepted is irrevocable, unless
the ground upon which it was made proves to be unfounded.
1984. On an accepted abandonment of a ship, freightage earned
previous to the loss belongs to the insurer of the freightage; but
freightage subsequently earned belongs to the insurer of the ship.
1985. If an insurer refuses to accept a valid abandonment, he is
liable as upon an actual total loss, after deducting from the amount
of the loss any proceeds of the insured subject matter which have
come to the hands of the insured.
1986. If an insured omits to abandon, he may nevertheless recover
his actual loss.
1987. (a) A valuation fraudulent in fact entitles a marine insurer
to rescind the contract.
(b) When the subject matter has been hypothecated by bottomry or
respondentia, before its insurance and without the knowledge of the
person actually procuring the insurance, such person may show the
(c) Otherwise a valuation in a policy of marine insurance is
conclusive between the parties in the adjustment of either a partial
or total loss if the insured has some interest at risk and there is
no fraud on his part.
1988. In a case of partial loss, a marine insurer is liable only
for such proportion of the amount insured by him as the loss bears to
the value of the whole interest of the insured in the subject
1989. Where profits are separately insured in marine insurance, in
case of loss the insured is entitled to recover that proportion of
such profits which the value of the subject matter lost bears to the
value of the whole.
1990. In case of a valued policy of marine insurance on freightage
or cargo, if only a part of the subject matter is exposed to risk,
the valuation applies only in proportion to such part.
1991. When profits are valued and insured by marine insurance, a
loss of them is conclusively presumed from a loss of the property out
of which they were expected to arise, and the valuation fixes their
1992. In estimating a loss under an open policy of marine
insurance, the following rules are to be observed:
(a) The value of a ship is its value at the beginning of the risk,
including all articles or charges which add to its permanent value
or which are necessary to prepare it for the voyage insured.
(b) The value of cargo is either its actual cost to the insured,
when laden on board, or, where that cost can not be ascertained, its
market value at the time and place of lading, adding the charges
incurred in purchasing and placing it on board, but without reference
(1) Any losses incurred in raising money for its purchase.
(2) Any drawback on its exportation.
(3) The fluctuations of the market at the port of destination.
(4) Expenses incurred on the way or on arrival.
(c) The value of freightage is the gross freightage, exclusive of
primage, without reference to the cost of earning it.
(d) The cost of insurance is in each case to be added to the value
1993. If cargo insured against partial loss arrives at the port of
destination in a damaged condition, the loss of the insured is
computed as follows:
(a) Deduct the market price, at port of destination, of the
damaged subject matter from its market price there when sound.
(b) Take that proportion of the value which the remainder thus
ascertained bears to such market price when sound.
1994. A marine insurer is liable for all the expense attendant upon
a loss which forces the ship into port to be repaired. Where it is
agreed that the insured may labor for the recovery of the property,
the insurer is liable for the expense incurred thereby. In either
case, the liability for such expense is in addition to the liability
for a subsequent total loss.
1995. In marine insurance, when an insured is required to make a
contribution in respect to the subject matter of insurance toward a
general average loss, if the average was called for on a loss by a
peril insured against, the insurer is liable for the insured's loss
through the contribution.
1996. In marine insurance, where an insured has a demand against
others for contribution, he may claim the whole loss from the
insurer, subrogating the insurer to the insured's right to
contribution. But no such claim can be made upon the insurer after
the separation of the interests liable to contribution, nor after the
insured, having the right and opportunity to enforce contribution
from others, neglects or waives the exercise of that right.
1997. In the case of a partial loss of a ship or its equipments,
the old materials are to be applied towards payment for the new.
Whether the ship is new or old, a marine insurer is liable for only
two-thirds of the remaining cost of the repairs after such deduction,
except that anchors and cannon must be paid for in full, and
sheathing metal at a depreciation of only two and one-half per cent
for each month that it has been fastened to the ship.