1.1 Background to the study
Over the years, the uncertainty regarding the safety of goods transported through the seas has resulted in the insurance of those goods between the insured and the insurer with the sole aim of recovering from the insurer any loss or damage as the case may be of such goods, provided the terms and conditions of the insurance contract are fully complied with by the contracting parties.
Insurance contract is a contract of indemnity, an arrangement that normally relieves the insured of the intractable safety risk of his goods and transfers same to the risk bearer – the insurer. By this agreement, the assured undertakes to fulfill all stipulated conditions including but not limited to payment of agreed premium governing the contract, while the insurer undertakes a corresponding duty to faithfully and diligently indemnify the insured whenever the situation arises.
As a risk management tool, the basic role of insurance in the economic and social structure of the society is the provision of relief from the financial consequences of elements of uncertainty. Its principles have over the years been perfected and utilized for the purpose of protecting individuals and corporate bodies against financial losses arising from death or injury in the case of life or accident insurance, and or loss or damage in the case of property insurance1.
However, section 56 of Nigerian Marine Insurance Act2 which provides for proximate cause of loss among other things works untold hardship on the part especially of the assured against being indemnified for his lost or damaged goods. The hardships created by this section have resulted in frustration and loss of livelihood of many people in shipping businesses.
One form of insurance contract and which is the focal point of this study is marine insurance contract.
Marine insurance is considered one of the oldest of the many forms of commercial protections and has flourished through the establishment of the institution of the “coffee- houses” wherein ‘underwriting’ was being conducted and from where the evolution and dominance of the Lloyd’s has stemmed as the world’s most famous insurance market3. It is a contract whereby the insurer
- IA Nwokoro and B C Ndikom Obed, ‘An Assessment of the Contributions of Marine Insurance to the Development of Insurance market in Nigeria’ Journal of Geography and Regional Planning, vol 5(8) 213, 18 April, 2012, (emphasis added).
- Cap M2 LFN 2004 (Loss and Abandonment: Included and Excluded Losses)
- K Noussia, The Principle of Indemnity in Marine Insurance contracts: A Comparative Approach, Springer, 2006.
undertakes to indemnify the assured in the manner and to the extent thereby agreed against marine losses, that is to say, the losses incident to marine adventure4, and marine adventure occurs when any ship, goods or other movables are exposed to maritime perils of which peril of the seas is obviously named as one of the perils5. The Marine Insurance Act defined maritime perils to mean, ‘perils consequent on or incidental to navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, capture, seizures, restraints, and detainments of princes and peoples, jettison, barratry and any other perils either of the like kind or which may be designated by the policy’6.
The principle of indemnity in marine insurance contract and other insurance contracts was clearly and distinctly stated by Cotton, LG in Castellan v Preston7 where he said,
the very foundation, in my opinion of every rule which has been applied to insurance law is this, namely that the contract of insurance contained in a marine or fire (and that equally applied to accident policies) is a contract of indemnity and of indemnity only, and that this contract means that the assured, in a case of loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. This is the fundamental principle of insurance and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the assured from obtaining a full indemnity or which will give the assured more than a full indemnity, that proposition must certainly be wrong.
The uncertain nature of contract of insurance regarding the happening of the event and its time of happening was exemplified by Channel, J in Prudential Insurance Co v Inland Revenue Commissioner8, where he emphasized thus:
…the next thing that is necessary is that the event should be one which involves some amount of uncertainty. There must be some uncertainty whether the event will happen or not, or if the event is one which must happen at some time or another, there must be uncertainty as to the time at which it will happen.
The principle of indemnity, (being the reserved hope and the predominant factor attracting the assured into insurance contract) simply provides that where there is a loss or damage (total- actual or constructive, partial) of the insured subject matter, the insurer is duty-bound to indemnify the assured to exactly the value or extent of the loss or damage, no more, no less. However, for the assured to be entitled to such indemnity, he must have insurable interest in the subject matter at the time of the loss or damage9, must have maintained regular payment of the
- S 3 Ibid, (n2).
- S Hodges, Law of Marine Insurance, (Cavendish Publishing Ltd 1996).
- S 5(3), (n2).
-  1 QBD 380 (CA).
- 2 KB 658 @ 663.
- S 7((2), (n4); Macaura v Northern Assurance Co Ltd  AC 619; Salomon v Salomon  AC 22.
premium10, and was not in breach of other fundamental terms and conditions of the contract, which otherwise are capable of vitiating the entire contract and denying him rights to be indemnified.
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APPRAISING THE CONCEPT OF LOSS AND RIGHT OF INDEMNITY IN NIGERIAN MARINE INSURANCE LAW