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
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
One form of insurance
contract and which is the focal point of this study is marine insurance
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
- K Noussia, The
Principle of Indemnity in Marine Insurance contracts: A Comparative Approach,
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