INTRODUCTION

Cargo insurance covers the cargo or goods contained in the ship and the personal belongings of
the crew and passengers. It provides cover for various transit perils in respect of goods and or
merchandise in transit from one place to another by sea, air, road or registered post. Transit or
marine risks or perils are covered under marine insurance. Marine insurance plays a pivotal role
in import, export and internal trade. Trade involves movement of goods from one place to
another place. Goods while in transit are liable to be lost or damaged through one or other of
various perils from the time it leaves the warehouse of the supplier till it is received at the final
warehouse of the consignee. Goods while in transit are generally exposed to any one of the
following perils leading to total loss or damage. A contract or policy of marine insurance is an
arrangement whereby one person called insurer or underwriter, agrees, according to specific
terms of contract, to indemnify another person, called assured, for the losses incurred in
connection with property, such as ship, goods or other movables, in maritime transport .
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the
assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the
losses incidental to marine adventure.1
Marine adventure includes any adventure where any insurable property is exposed to maritime
perils i.e. perils consequent to navigation of the sea. It also includes the earnings or acquisition of
any freight, passage money, commission, profit or other pecuniary benefit, or the security for any
advances, loans, or disbursements is endangered by the exposure of insurable property to
maritime perils 2 .Marine adventure also includes any liability to a third party may be incurred by
the owner of, or other person interested in or responsible for, insurable property by reason of
maritime perils. A contract of marine insurance may, by its express terms, or by usage of trade,
be extended so as to protect the assured against losses on inland waters or on any land risk which
may be incidental to any sea voyage.3
1 Section 3 of the Marine Insurance Act, 1963.
2 Section 2(e) of the Marine Insurance Act, 1963.

Marine insurance business means the business of effecting contracts of insurance upon vessels of
any description, including cargoes, freights and other interests which may be legally insured in or
relation to such vessels, cargoes and freights, goods, wares merchandise and property of
whatsoever description insured for any transit by land or water or air or all the three. The same
may include warehouse risks or similar risks in addition or as incidental to such transit and
includes any other risks which are customarily included among the risks insured against in
marine insurance policies4.
Thus, insurance is a business of taking over others risks; and accordingly, the commitments that
insurers undertake should be honoured as and when they fall due. Insurers manage their risk to
tolerable levels by adopting such measures as pooling of independent risks, spreading and
reinsuring large risks, exercising control over fraudulent claims, designing suitable asset liability
management etc. In order that insurers are capable of fulfilling the promises under the contracts,
they charge premium from the assured, depending upon their estimation of degree of the risk,
and are mandated to maintain a sufficient level of capital.
In other words, the purpose of any form of insurance is to replace what has been lost. It is not
intended that assured should make a profit from his loss but that he should merely be in worse
situation than he was before the loss occurred. Further, it is not practicable to expect the insurer
to replace an object which is lost, nor it is reasonable to expect him to remove the damage thus
restoring the damaged object to the whole sound object. As a compromise, any recompense must
be of a monetary nature and this system of reimbursement is called indemnifying.

3Section 4[1]) of the Marine Insurance Act, 1963.

4 http://www.lawteacher.net/free-law-essays/commercial-law/legal-aspects-ofmarine-insurance-law-essays.php