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PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-10 | Marine Recoveries
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♦CHAPTER 10: MARINE RECOVERIES
- Primarily it is the senders’ right to recover their losses from carriers and bailees but once the marine insurers pay ship claim, they get vested with the rights of recovery under subrogation
- The right of subrogation arises under common law and also under Marine Insurance Act 1963
- Under subrogation the insurers step into the shoes of the insured and thereby get vested with the rights of recovery from the carriers and bailees (In other words, the claimants’ rights are transferred to insurers on payment of a claim by the latter under an insurance policy.)
- It is of vital importance to underwriters that prospects of recovery from third parties are actively pursued after a cargo claim is settled.
- Any recovery of a claim paid will go to reduce the claims ratio and thus directly benefit the cargo underwriting results.
- To succeed in recovering a claim from the carrier or other, it is necessary to show that:
- The goods were in the care of the carrier or other bailee at the time the loss or damage occurred;
- The goods were in sound condition, with no packages missing, when received by the carrier or other bailee;
- The carrier or other bailee failed to deliver the goods or delivered them in a damaged condition.
- In principle, the person who has custody of the goods is responsible for safe delivery to the next custodian.
- In the process, goods shipped conventionally, pass through a chain of bailees before they reach the consignee. Parties involved may be: Professional packers, Inland rail or road carriers, Freight forwarders, Warehousemen, Port authority, Stevedores, Lightermen, Customs authorities, Clearing agents and others at destination
- The Indian Carriage of Goods by Sea Act, 1925 (COGSA, 1925) As Amended
- Ship owner’s responsibilities and liabilities
i)To exercise due diligence and care to make the ship seaworthy, properly man, equip and supply the ship and to make the ship fit to carry the cargo.
ii) Properly and carefully to load, handle, stow, carry, keep, care for and discharge the goods carried, subject to the various immunities provided
- Leading marks necessary for the identification of the cargo;
- Number of packages, pieces, with quantity or weight, as furnished in writing by the shipper; and
- The apparent order and condition of the goods, provided there is no obligation to show such details if the carrier suspects the accuracy, or he has no reasonable means of checking.
iv) Such a bill of lading (B/L) shall be prima facie evidence of receipt by the carrier of the goods described therein.
v) The shipper shall be deemed to have guaranteed to the carrier the accuracy of marks, numbers, quantity and weight of the goods as furnished by him; otherwise the shipper shall indemnify the carrier against all loss, damage and expenses arising from inaccuracies in such particulars.
11.When loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption from liability.
12.Neither the carrier nor the ship owner shall be responsible for loss or damage arising or resulting from:
- Negligent navigation or management of the ship
- Fire, unless caused by the actual fault or privity of carrier
- Perils, dangers and accidents of the sea or other navigable waters
- Act of god, act of war, act of public enemies
- Arrest or restraint of princes, rulers or people or seizure under legal process
- Quarantine restrictions
- Act or omission of the shipper or his agent or representative
- Strikes, lock-outs, stoppage or restraint of labour
- Riots and civil commotions
- Saving or attempting to save life or property at sea
- Inherent defect or vice of the goods
- Insufficiency of packing
- Insufficiency or inadequacy of marks
- Latent defects not discoverable by due diligence
- Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception.
- The carrier shall not be liable for any loss or damage resulting from any deviation in saving or attempting to save life or property at sea or any reasonable deviation.
- The carrier shall not be liable for loss or damage to the goods if the nature or value thereof has been knowingly misstated by the shipper in the bill of lading.
- Goods of an inflammable, explosive or dangerous nature, to the shipment whereof the carrier or master has not consented with knowledge of their nature and character, may at any time be landed at any place or destroyed or rendered innocuous by the carrier without compensation and the shipper shall be liable for all damages and expenses arising out of or resulting from such shipment
- 16. Liability of the carrier for loss of or damage to cargo is limited to 666.67 SDR (Special Drawing Rights) per package or unit of freight or 2 SDR per kg. of gross weight of the goods lost or damaged, whichever amount is higher, unless the nature and value of such goods are declared by the shipper and inserted in the B/L.
- The ocean carrier is discharged from all liability in respect of loss or damage, unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered
- Unless notice of loss or damage be given in writing to the carrier at the port of discharge or at the time of removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, or if loss/damage be not apparent, within three days, such removal shall be prima facie evidence of delivery by the carrier of the goods as described in the B/L.
- COGSA, 1925 applies to “goods” and “goods” are defined as “including goods, wares, merchandise, containers, pallets or similar articles of transport used to consolidate goods if supplied by the shipper and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.”
- The SDR (Special Drawing Rights) is a “currency basket” made up of five currencies as follows:
- S. Dollar 42%
- German DM 19%
- Pound Sterling 13%
- French Franc 13%
- Japanese Yen 13%
- Carriage of goods by rail: Effective from 1st July, 1990, the new Indian Railways Act, 1989 came into force. It replaced the earlier Act of 1890.
- Under Provisions of The Railways Act 1989 there are two types of freights.
- Railways’ Risk Rate (RRR) and Owners’ Risk Rates(ORR)
- ORR being lower the liability of railway is lower whereas under RRR the liability of railways is like the road carrier’s, making them liable for nearly every loss in transit
- The Railway Administration is responsible for all loss, damage, deterioration in transit or non-delivery of any consignment, arising from any cause except the following, namely –
- Act of God
- Act of War
- Act of public enemies
- Arrest, restraint or seizure under legal process
- Orders or restrictions imposed by government
- Act/omission/negligence of consignor or consignee or their agents/servants.
- Natural deterioration or wastage in bulk or weight due to inherent defect, quality or vice of the goods
- Latent defects
- Fire, explosion or any unforeseen risk
- Where any consignment is entrusted to the Railway Administration without declaring its value, the Railway Administration may restrict its liability for loss, damage, etc. to the goods it carries to a particular amount, based on the weight of the goods
- the government has limited the liability of the Railways to Rs.50/- per kg. weight of the goods lost, damaged, etc. A higher limit of Rs.100/- per kg. is applicable to baggage only, that is, bonafide booked luggage of a passenger.
- Such notice is required to be preferred in writing within SIX MONTHS from the date of entrustment of goods for carriage by railways
- Time limit on legal action:
- A suit can only be filed against the railway administration after the claimant has served a statutory notice of 2 months under Section 80 of the Civil Procedure Code for final reply to the party by the railway.
- Suit for non-delivery or delay in delivery can be filed within 3 years from the probable date when the goods ought to have been delivered. For loss, damage, etc., the suit can be filed within 3 years from the date of such loss, damage, etc.
- Application for compensation is to be made to Railways Tribunal operating in the area of jurisdiction, where the notice of claims was given to the railways.
- Liability of road transporters is governed by the Carriers Act, 1865 according to which anyone who carries goods not belonging to him for hire or reward is a common carrier.
- Recently parliament has passed a law – The Carriage by Road Act, 2007, which governs carriage by road and also by courier
- The common carrier has only three immunities to escape liability as against quite a number granted to Railways under the Railways Act, 1989. These immunities are:
- Act of God
- Act of war or public enemy
- Riots and civil commotion
- Arrest restraint or seizure under legal process
- Order or restriction or prohibition imposed by Central Government or State Government
- Road carrier is liable for every loss occurring while goods are in their custody
- The burden of proving negligence on the part of the carrier is not on the claimant and it is the carrier who has to establish that there was no negligence on his part.
- Notice of loss, damage, etc. must be given to the carrier within six months from the date of knowledge of loss. (Under Carriage by Road Act, 2007 within 180 days of booking of the consignment
- If the claim is not settled by the road carrier, suit must be failed within three years from the knowledge of loss as (or from date of booking –Carriage by Road Act 2007) prescribed by the Limitation Act
- Important Features of Carriage by Road Act 2007
- Definition of “Common carrier” widened. Now includes couriers also.
- Registration with prescribed authority compulsory.
- Vehicle cannot be loaded beyond registered carrying capacity.
- Lorry Receipt to be issued in prescribed format only.
- Liability of carrier limited, depending upon value, freight and nature of goods.
- If agreed, carrier liable for delay also but up to value of freight only.
- Higher liability can be accepted by carrier after charging higher freight.
- For losses, negligence of the carrier is to be proved and the liability is not presumed.
- Time limit of 180 days from date of LR to lodge monetary claim on carrier.
- The implementation of Act subject to Carriage by Road Act Rules 2010.
- In India, for domestic flights, the liability of the air carriers is governed by the Indian Carriage of Goods by Air Act, 1972. The Act has been recently amended by The Carriage by Air Act 2007.
- Notice of loss or damage: Such notice should be given in writing within 14 days from receipt of goods in case of damage to cargo and 7 days from receipt of baggage in case of damage to passengers’ luggage.
- In case of delay either to goods or luggage, the time limit is 21 days from the date when the consignment was expected to be delivered.
- The carrier is liable for loss or damage to cargo sustained during carriage by air (whether in an aircraft or an aerodrome or in the event of forced landing, anywhere else), so long as it was not due to causes such as:
- Inherent vice of the air cargo;
- Defective packing by some person other than the carrier, his servants or agents;
- Act of war or armed conflict;
- Act of public authority in connection with the entry, exit or transit of cargo.
- The onus of proof that loss/damage occurred while goods were not in an aircraft or aerodrome rests on the party alleging it.
- The carrier is liable for damage occasioned by delay of both baggage and cargo, but not if he can prove that he took all reasonable measures to avoid the damage or that it was impossible to take such measures
- Limitation of monetary liability
- 17 SDR per kg. gross of lost or damaged goods, unless a higher value has been declared and a supplementary charge paid.
- As per Indian Carriage of Goods by Air Act, the limit is Rs.450/- per kg. for domestic carriage within India.
- Time limit for legal action is two years reckoned from the date of booking of the cargo or luggage.
- 44. In India, the Multimodal Transportation of Goods Act, 1993 was enacted on 2nd April, 1993 and it came into force from 16th October, 1993
- The Act seeks to regulate the business of Multimodal Transportation and delineate the responsibilities and liabilities of the Multimodal Transport Operator (MTO).
- The MTO remains responsible for the goods throughout the period from the time he takes them in his charge until the time of their delivery.
- The MTO shall be liable for loss resulting from:
- Any loss of or damage to the consignment
- Delay in delivery of the consignment and any consequential loss/damage arising from such delay
- MTO shall not be liable if he proves that no fault or neglect on his part or that of his servants or agents had caused or contributed to such loss, damage or delay in delivery
- Liability of the MTO shall not exceed 2 SDR per kg. of gross weight of the goods lost or damaged, or 666.67 SDR per package or unit lost or damaged, whichever is higher.(If the nature and value whereof have not been declared by the consignor before such consignment was taken in charge by the MTO)
- One container containing 20 packages (declared as such) total weight 1500 kgs.
On the basis of packages: 20 X 666.67 = 13333.40 SDRs
On the basis of weight: 1500 X 2 = 3,000.00 SDRs
So, the MTO’s liability will be 13333.40 SDRs, which is higher of the two
- If no sea or inland waterway leg is involved in the transit, then the limitation is based solely on weight, that is, 8.33 SDR per kg. of gross weight of goods lost or damaged.
- If the stage of transport at which such loss/damage occurred is known, then the limit of liability of the MTO shall be determined in accordance with the provisions of the relevant law applicable in relation to the mode of transit, during the course of which such loss or damage occurred.
- Thus, if the location of loss/damage cannot be ascertained, then the MTO’s liability, based on presumed fault, will be uniform throughout
- Where delay in delivery of the consignment occurs then the liability of the MTO shall be limited to the freight payable for the consignment so delayed.
- notice should be given by the consignee in writing to the MTO at the time the goods are delivered to the consignee. Otherwise, the delivery shall be treated as prima facie evidence of delivery as described in the MT document.
- However, where loss/damage is not apparent, such notice should be given within 6 days from the date of delivery.
- The MTO shall not be liable under any of the provisions of the Act unless legal action against him is brought within 9 (nine) months of the date of delivery of the goods or the date when the goods should have been delivered.
- All major ports in India, namely,
- Kandla, Mumbai, Nhava Sheva,
- Marmugao, Mangalore, Paradeep,
- Cochin, Tuticorin, Chennai,
- Visakhapatnam, Haldia and Calcutta
- Under the Major Port Trusts Act and the Rules, the Board of Trustees are not liable under the following circumstances:
- No liability attaches to the Board under Sec.43 after a period of 7 clear working days of taking charge of the goods by the Board.
- The notice of loss or damage should be given to the Board within a period of 7 days from the date of taking charge of such goods by the Board.
- If the goods are not cleared in 7 days from the date of landing, the same will remain on the premises of the Board at the sole risk and expense of the owner.
- 61 provides that the Port Trust may sell the goods by auction if Port dues and other charges including demurrage are not paid. Before taking such action, the Port Trust has to give 10 days’ notice in Port Gazette or in a principal daily newspaper.
- Liability will be for market value of the goods.
- Indian Post Office Act, 1898 limits the liability of the postal authority to Rs.25/- per package for loss, short-delivery, delay or damage, unless the parcel is insured.
- Notice of claim must be given within 6 months from the booking date. (Indian Post Office)
- Suit should be filed within 3 years from the knowledge of loss subject to 60 days notice under Sec.80 of CPC. (Indian Post Office)
- Under Section 27 of the Customs Act, 1862, refund of duty is allowed for shortage due to pilferage and for goods lost or destroyed or for shortlanded cargo or landed but missing cargo.
- Application for refund should be made to the Assistant Controller of Customs within 6 months of the payment of duty
- This time limit will not apply where duty has been paid under protest or where duty has been recovered by Customs without jurisdiction or authority of law
- Duty paid under “Mistake in law” would fall within Section 72 of the Contract Act 1872 and, therefore, limitation in such an event would be 3 years
- Appeal can be made to the Collector of Customs (Appeals) on a prescribed form within 3 months of the date of receipt of communication of the decision of the Assistant Collector of Customs.
- The Collector may condone delay in filing appeal for further 3 months, where justified by sufficient cause.
- Appeal against the decision of the Collector of Customs can be filed with the Appellate Tribunal within 3 months of the receipt of the decision from the Collector of Customs.
- The correct basis to work out liability of carrier, Port Trust or other bailees is the market value, subject to maximum liability as may be restricted by the respective laws.
- Insurers are involved in disposal of salvage when a claim is settled on “total loss” basis and the insurer takes over whatever remains of the subject matter insured.
- The other circumstances where insurers are directly or indirectly involved in the disposal of salvage may be as follows:
- When a loss is assessed on a “net” basis after deducting the value of salvage, which is retained by the insured himself. In such cases, utmost care should be taken to ensure that the value of salvage brought into account is reasonable.
- When the insured subject matter suffers irrepairable damage, and though not a total loss, it becomes necessary to dispose it off for the benefit of all concerned.
- When the damaged parts of an insured machine become the property of the insurer, when replaced by new parts
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