Maritime Law and Practice in China
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CHAPTER 15
Marine Insurance
Marine Insurance
15.1 Marine insurance in China is mainly governed by the CMC 1992. For matters not covered by the CMC 1992, the Insurance Law 1995 as amended in 2002, 2009, 2014 and 2015 applies (Insurance Law 2015).1 Besides the law, the practice of marine insurance also follows the Provisions of the Supreme People’s Court on Several Issues on the Trial of Cases Concerning Marine Insurance Disputes 2006 (Provisions on Marine Insurance 2006).2 In the practice of maritime insurance, if there is no such provision in the CMC 1992 and the Insurance Law 2015, the relevant legal provisions in the Contract Law 1999 apply.3 For example, the Insurance Law 2015 applies to disputes over marine insurance contracts with port facilities or docks as insurance objects that do not result from marine accidents.4 In other words, the CMC 1992 shall apply to cases in which the insurer exercises the right of subrogation due to an insurance accident arising out of the collision between ships and port facilities or docks.5 15.2 Protection and indemnity insurance, commonly known as P&I insurance, is a form of mutual maritime insurance provided by P&I Clubs, e.g. China Shipowners Mutual Assurance Association and China Fishing Vessels Owners Mutual Insurance Association.6 A P&I insurance contract, evidenced by the membership certificate and the club rules, is a valid insurance contract.7 However, unlike marine insurers that usually are for-profit companies, P&I Clubs are non-profit associations of members, e.g. shipowners.8 Therefore, the P&I insurance contract between China Shipowners Mutual Assurance Association and its members is not considered as a commercial contract of insurance, and the Contract Law 1999 rather than the Insurance Law 2015 applies to the P&I insurance contract.9 This rulePage 161
Marine insurance contract
15.3 Under the CMC 1992, a contract of marine insurance is a contract whereby the insurer undertakes, as agreed, to indemnify the loss of the subject-matter insured and the liability of the assured caused by perils covered by the insurance against the payment of an insurance premium by the assured.12 In the conclusion of a marine insurance contract, the assured provides a proposal for insurance, and the insurer will decide whether or not to accept the proposal. A contract of marine insurance is concluded when the insurer and the assured agree on the terms and conditions of the insurance. After the conclusion of the marine insurance contract, the insurer issues an insurance policy or other certificate of insurance to the assured in time and the contents of the contract are contained therein.13 If there is no agreement of marine insurance, even if the insurer arranges for an examination, assesses the loss and supervises the consequential works after the occurrence of accident, it cannot be presumed that a contract of marine insurance has been concluded.14Perils
15.4 The covered perils under the CMC 1992 mean any maritime perils agreed upon between the insurer and the assured, including perils occurring in inland waters or on land that is related to a maritime peril.15 In other words, the CMC 1992 may apply to the marine insurance for carriage of goods by inland waters, even if it does not apply directly to only the carriage of goods by inland waters.16 The subject-matter insured includes but is not limited to, the ship, cargo, income from the operation of the ship including freight, charter hire and passenger’s fare, expected profit on cargo, crew’s wages and other remuneration, liabilities to a third person and other property that may sustain loss from a maritime peril, and the liability and expenses arising therefrom. The insurer may reinsure the insurance of the subject-matter. Unless otherwise agreed by contract, the original assured is not entitled to the benefit of the reinsurance.17Page 162
Insurable value and insured amount
15.5 The insurable value of the subject-matter insured shall be agreed upon between the insurer and the assured. Where no insurable value has been agreed, the insurable value shall be calculated as follows:18- (1) The insurable value of the ship shall be the value of the ship at the time when the insurance liability commences, being the total value of the ship’s hull, machinery, equipment, fuel, stores, gear, provisions and fresh water on board as well as the insurance premium.
- (2) The insurable value of the cargo shall be the aggregate of the invoice value of the cargo or the actual value of the non-trade commodity at the place of shipment, plus freight and insurance premium when the insurance liability commences.
- (3) The insurable value of the freight shall be the aggregate of the total amount of freight payable to the carrier and the insurance premium when the insurance liability commences.
- (4) The insurable value of other subject-matter insured shall be the aggregate of the actual value of the subject-matter insured and the insurance premium when the insurance liability commences.
The insured amount shall be agreed upon between the insurer and the assured. The insured amount shall not exceed the insured value. Where the insured amount exceeds the insured value, the portion in excess is null and void.19