Marine Insurance Act 1906

The Marine Insurance Act 1906 is a UK Act of Parliament regulating marine insurance. The Act was drafted by Sir Mackenzie Dalzell Chalmers, who had earlier drafted the Sale of Goods Act 1893. The Marine Insurance Act 1906 is of huge significance, as it does not merely govern English Law, but dominates marine insurance worldwide. The Act applies not only to "commercial" marine insurance, but also to protection and indemnity insurance (P&I clubs). This hundred-year-old act is reaching the end of its life and is expected to be repealed and reenacted by about 2012 (see below).

Overview

The most important sections of this Act include:

s.4: a policy without insurable interest is void.

s.17: imposes a duty on the insured of uberrimae fides (as opposed to caveat emptor); ie. that questions must be answered honestly and the risk not misrepresented.

s.18: the proposer of the insurer has a duty to disclose all material facts relevant to the acceptance and rating of the risk. Failure to do so is known as non-disclosure or concealment (there are minor differences in the two terms) and renders the insurance voidable by the insurer.

s.33(3): If [a warranty] be not [exactly] complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.

s.34(2): where a warranty has been broken, it is no defence to the insured that the breach has been remedied, and the warranty complied with, prior to the loss.

s.34(3): a breach of warranty may be waived (ie. ignored) by the insurer.

s.50: a policy may be assigned. Typically, a shipowner might assign the benefit of a policy to the ship-mortgagor.

ss.60-63: deals with the issues of a constructive total loss. The insured can, by notice, claim for a constructive total loss with the insurer becoming entitled to the ship or cargo if it should later turn up. (By contrast an actual total loss describes the physical destruction of a vessel or cargo.)

s.79: deals with subrogation; ie. the rights of the insurer to stand in the shoes of an indemnified insured and recover salvage for his own benefit.

Schedule 1 of the Act contains a list of definitions; schedule 2 contains the model policy wording.

http://www.airmic.com/research/guides/disclosure-material-facts-and-information-business-insurance

Reform

The Act is up for review due the perception that there is a problem with uberrimae fidei. Insurance involves the transference of risk in return for an insurance premium (or fo a "P&I call"); and it is essential for the assured to make to the insurer a full disclosure of all material risks. However, beyond this disclosure requirement, some people think there is little need for utmost good faith in insurance contracts and argue it is hard to see how insurers should reciprocate good faith to the assured. (A minor issue is that "theft" in the 1906 Act would be more properly termed "burglary" or "robbery", using the definitions of the Theft Act 1968). It is expected that the proposed new Marine Insurance Act will be very close in form and content to the current 1906 Act. (When Sir Mackenzie Chalmers' Sale of Goods Act 1893 was repealed and reenacted as the Sale of Goods Act 1979, the new statute retained similar wording and section numbering as the original Act, much to everyone's relief).

See also

• UK commercial law
• UK insurance law

Notes