Kinds of loss in marine insurance and abandonment

1. The basic rule

Subject to the Act and the policy, the insurer is liable for any loss proximately caused by a peril insured against and not for any other loss (s.55(1)). It is not liable for loss attributable to the wilful misconduct of the assured, for loss proximately caused by delay, or for ordinary wear and tear, ordinary leakage and breakage, inherent vice, rats or vermin, or injury to machinery not proximately caused by maritime perils (s.55(2)). A loss is either total or partial; any loss other than a total loss is partial (s.56(1)). A total loss is actual or constructive (s.56(2)), and insurance against total loss includes both unless the policy shows otherwise (s.56(3)). If the assured sues for a total loss but proves only a partial loss, he may recover for the partial loss (s.56(4)).

2. Actual total loss

Under s.57(1) there is an actual total loss where the subject matter is:

• destroyed (the ship sinks in deep water, the cargo burns);
• so damaged as to cease to be a thing of the kind insured (in Asfar v. Blundell, 1896, dates on a sunken barge were so soaked in sewage and fermented that they were no longer dates as a merchantable article; held an actual total loss though the pulp remained); or
• where the assured is irretrievably deprived of it (seizure and confiscation with no prospect of return).

No notice of abandonment is needed for an actual total loss (s.57(2)). A missing ship, of which no news has been received after a reasonable time, may be presumed an actual total loss (s.58). Goods that arrive in specie but cannot be identified because marks are obliterated are a partial, not total, loss (s.56(5)).

3. Constructive total loss

Section 60(1): there is a constructive total loss where the subject matter is reasonably abandoned because its actual total loss appears unavoidable, or because it could not be preserved from actual total loss without an expenditure exceeding its value when the expenditure had been incurred. In particular (s.60(2)):

• where the assured is deprived of possession of ship or goods by an insured peril and it is unlikely he can recover them, or the cost of recovery would exceed their value when recovered;
• for a ship, where the cost of repairs would exceed her value when repaired (general average contributions by others are not deducted from the repair cost, but future salvage and general average contributions are added);
• for goods, where the cost of repairing them and forwarding them to destination would exceed their value on arrival.

Effect (s.61). The assured may either treat the loss as partial, or abandon the subject matter to the insurer and treat it as an actual total loss.

4. Notice of abandonment and its effect

• If the assured elects to abandon, he must give notice of abandonment; if he does not, the loss can only be treated as partial (s.62(1)).
• Notice may be written, oral or both, in any terms showing intention to abandon the insured interest unconditionally (s.62(2)).
• It must be given with reasonable diligence after reliable information of the loss, with reasonable time for inquiry if the information is doubtful (s.62(3)).
• If properly given, the assured’s rights are not prejudiced by the insurer’s refusal to accept (s.62(4)). Acceptance may be express or implied, but mere silence is not acceptance (s.62(5)). Once accepted, abandonment is irrevocable and admits liability (s.62(6)).
• Notice is unnecessary where it could be of no benefit to the insurer (s.62(7)), may be waived (s.62(8)), and is not required from an insurer who has reinsured (s.62(9)).
• Effect (s.63). On a valid abandonment the insurer may take over the assured’s interest in whatever remains and all proprietary rights incidental to it; on abandonment of a ship it is entitled to freight being earned after the casualty, less expenses. This is related to, but distinct from, subrogation under s.79.

5. Partial losses

• Particular average loss (s.64(1)): a partial loss of the subject matter caused by an insured peril which is not a general average loss. It falls on the owner of the damaged interest alone, and he recovers it from his own insurer. Example: sea water damages part of a cargo in heavy weather.
• Particular charges (s.64(2)): expenses incurred by or for the assured for the safety or preservation of the subject matter, other than general average and salvage charges (such as the cost of drying wet cargo). They are not part of particular average, and are recoverable under the suing and labouring clause (s.78).
• Salvage charges (s.65): charges recoverable under maritime law by a salvor independently of contract, for saving property from an insured peril; recoverable as a loss by that peril. Services rendered by the assured’s own agents or hired persons are recovered as particular charges or general average instead.
• General average loss (s.66): a loss caused by or directly consequential on a general average act, which is any extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure (s.66(2)). Examples: jettison of cargo to lighten a stranded ship, cutting away a mast, deliberately beaching a ship, expenses of a port of refuge. The party on whom it falls is entitled to a rateable general average contribution from all other interests saved (s.66(3)). The assured may recover from his insurer the whole of a general average sacrifice without first enforcing contribution from others, and his share of a general average expenditure (s.66(4)); he may also recover a general average contribution he has to pay (s.66(5)). Adjustment is normally under the York-Antwerp Rules.

Particular and general average contrasted: particular average is accidental and borne by one interest; general average is intentional, made for the common safety, and shared by all interests.

6. Measure of indemnity and related rules

• Total loss (s.68): under a valued policy, the sum fixed by the policy; under an unvalued policy, the insurable value.
• Partial loss of ship (s.69): the reasonable cost of repairs less customary deductions, not exceeding the sum insured; if not repaired, the reasonable depreciation.
• Partial loss of goods (s.71): where goods are delivered damaged, the proportion of the sum fixed (or insurable value) that the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value; where part is totally lost, the value of that part.
• Successive losses (s.77): the insurer is liable for each, even if the total exceeds the sum insured, but an unrepaired partial loss followed by a total loss merges in the total loss.
• Under-insurance (s.81): the assured is his own insurer for the uninsured balance.
• Particular average warranties (s.76): where the subject matter is warranted “free from particular average”, the assured cannot recover for a loss of part, other than a loss by general average sacrifice, unless the contract is apportionable, but the insurer still pays salvage and sue-and-labour charges; the memorandum in the policy also frees insurers of small partial losses below a stated percentage unless general or the ship be stranded.
• Suing and labouring (s.78): expenses properly incurred to avert or minimise a covered loss are recoverable in addition, even if the insurer pays a total loss.

7. Problem

A ship carrying cargo of A, B and C is caught in a storm and is in danger of sinking. The master throws A’s cargo, worth ₹10 lakh, overboard and the ship and the rest of the cargo reach port safely. A’s cargo was insured. Advise A.

Issue. What kind of loss A has suffered and from whom he may recover.

Law. A general average act is an extraordinary sacrifice voluntarily and reasonably made in time of peril to preserve the common adventure (s.66(2)). The owner whose property is sacrificed is entitled to rateable contribution from the other interests (s.66(3)), and may recover the whole of a general average sacrifice from his insurer without first enforcing contribution (s.66(4)).

Application. The jettison was deliberate, in real danger, and for the safety of ship and cargo. It succeeded. It is a general average sacrifice, not a particular average loss. The shipowner (for the ship and freight), B and C must contribute in proportion to the values saved. A need not wait for that adjustment.

Conclusion. A may recover ₹10 lakh from his insurer at once. The insurer is then subrogated to A’s right to general average contribution from the shipowner, B and C (and their insurers, who in turn are liable to them under s.66(5)).

How this is examined

“Explain the different kinds of losses in marine insurance” (January 2026) is answered with the tree and sections 2 to 5. Short notes: constructive total loss, notice of abandonment, general average. Problems on jettison, a ship beyond economic repair (constructive total loss), or damaged cargo (particular average) follow the pattern above.