Explain various types of losses under cargo insurance with examples.

 The various perils covered under marine policies may result in payment of different types of losses. These may be categorised as follows:

(1) Total Loss

There are two types of total losses. These are as follows:

(a) Actual Total Loss (ATL): There is an actual total loss where the subject-matter insured is destroyed, or damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived. When the subject matter is destroyed, there is a clear case of actual total loss. However, the word ‘destroyed’ is not to be interpreted literally. If a vessel is badly damaged by fire reducing it to charred metal, absolutely beyond repair, it is deemed to. be. total loss. Thus, total physical) destruction is not contemplated.

(b) Constructive Total Loss (CTL): Unlike the actual total loss, CTL is not a physical loss and is not absolute. CTL may be defined as a total loss when the cost of saving, repairing or reconditioning the insured goods is more than the value of goods. For example, a machine while loading on board the carrier is damaged and the cost of repairing is so prohibitive that the insured may consider this damage as total loss. On examination of the nature of damage and the expected cost of repairing, the insurance company may also consider it as a total loss. CTL may also be claimed when am actual total loss seems unavoidable. For example, cargo in a ship while ground or ashore cannot be taken out of the ship within a reasonable cost, the assured may claim CTL.

(2) Particular Loss

There are two types of particular losses. These are as follows:

(a) General Average: Sometimes a ship-owner either sacrifices some cargo the ship is carrying or incurs some expenditure, which becomes necessary to save the journey. Such a sacrifice or expenditure will have to be shared by the interests in the saved journey. Thus, the insured will be protected from paying for the loss. Partial loss or average of this nature is known as General Average or GA and comes into being only when the ship carrying cargo arrives safely. If a ship is lost and does not, therefore, arrive at the ultimate destination, there can be no GA.

Regarding GA, an accepted principle of maritime law is that all who expose their property to maritime perils are in it together and should share in any misfortunate on an equal. basis. In other words, GA sacrifices/expenditure is to be shared by all interest in the journey, i.e. the cargo owners, ship-owners and freight earners.

GA expenditure can be understood clearly from. the following examples:

(i) Some cargo is thrown into the sea to lighten the ship in rough weather,

(ii) Water is poured on cargo (not on fire) to extinguish a fire;

(iii) — Expenses are incurred to tow a ship in the danger of sinking to the safety of the port;

(iv) A part of cargo is burnt to maintain steam in the ship’s boilers when the ship runs short of fuel to delay caused by heavy weather.

The sharing of GA sacrifice or expenditure by the three parties to the adventure is done in accordance with the intemationally agreed rules, known as the York-Antwarp Rules 1974.

(b) Particular Average: Particular average loss can be the partial loss of the subject matter insured, caused by a peril insured against, and it is not a general average loss. Particular average therefore means a fortuitous partial loss caused by a peril insured against.

Examples of particular average are— damage to the ship by stranding, running aground, collision, etc. damage to the cargo by fire, seawater, etc.

The essence of a particular average loss is that it must be accidental and, in order to be recoverable under the policy, proximately caused by a peril insured. against, Any loss through ordinary wear and tear, ordinary leakage and breakage or due to the inherent nature of the subject matter insured is excluded. It is obvious that particular average covers a very wide range of losses, and it may be damaged too, or loss of part of the subject matter insured.

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