Marine Warranty Surveyor: Case Studies and Analysis Report

This report delves into the multifaceted role of a Marine Warranty Surveyor (MWS) within the context of marine insurance. It begins by outlining the fundamental ingredients of an insurance contract, emphasizing the importance of principles such as utmost good faith and insurable interest, and their relevance to marine contracts. The report then explores the legislative context of insurance law, highlighting its connection to marine insurance and the MWS's function. The core responsibilities of the MWS are examined, including risk assessment, compliance with warranties, and maintaining balance between various stakeholders. The report further presents two case studies illustrating breaches of warranty, analyzing scenarios where shippers' actions led to violations of insurance policy conditions. Finally, a detailed case study is provided concerning the 'B ATLANTIC' vessel, examining the concept of Constructive Total Loss (CTL), the impact of the Institute War Clauses, and the wrongful detention of the vessel in Venezuela. The report concludes with an analysis of the legal and insurance implications of the case, offering insights into the role of the MWS in preventing breaches and ensuring compliance with insurance policies.

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Marine Warranty Surveyor |
Marine Warranty Surveyor
By
Andrew Hughes
ID:44662547
Andrew Hughes

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Activity 1
1. The fundamental ingredients of an insurance contract include the following: the offer and
acceptance between the assured and the insurer, presence of an insurable interest, utmost
good faith, the immediate and the proximate causes are under the insurance contract.
Furthermore, the methods of subrogation, indemnity and contribution are under the
elementary principle of an insurance. It also includes the key idea of having the minimum
1losses at every stage of agreement. These principles are at par with the marine contract.
This is because, for the construction of a marine contract, the above principles and
elements are important and for the building up of the marine contract2.
2. The legislative context of the insurance contract is covered under the insurance law. The
legislative context covers the insurance claims and the policies. This context also covers
the business of the insurance, the regulation and monitoring of the contents and the
specifications stated under such insurance policies and claims and the regulation and the
monitoring of the handling of claims. The connection between the marine insurance and
the warranty surveyor with insurance law is that, there are similar rules and conditions
which base their functioning and the proceeding with the contract between the parties.
3. A marine warranty can be highly effective in having an effect upon the role of warranty
surveyors. The role of a warranty surveyor includes the reviewing and the collecting of
certificates of approval and certificate of conformity, attendance of the sites, undertaking
1Andersen, Siri, and BodilAamnesMostue ‘Risk analysis and risk management approaches
applied to the petroleum industry and their applicability to IO concepts’ (2012) 50(10) Safety
Science 2010-2019.
2Baker, Tom, and Kyle D. Logue, Insurance law and policy: cases and materials (Wolters
Kluwer Law & Business, 2017).
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risks and implementing policies to reduce the damages to the workplace. The role also
includes the incorporation of the safe method management with the highest output in the
workplace3. In a marine warranty too these conditions need to be emphasized upon and
considering the concepts of the marine warranty, the role of the warranty surveyor could
improve.
4. The connection between the warranty surveyor, underwriter =, the assured and the broker
can be complex. However, it is considered as an important role on the part of the
warranty surveyor to implement a balance between them all to extract their services as
per the requirements and fulfills their role in the relationship. The warranty surveyor
plays immense roles in the work to get all functions done. While the role play, he
maintains the balance and performs little tasks for each other. He maintains a good
relationship between all the people connected herewith for the completion of the desired
work.
5. The warranty surveyor has immense roles to play in the fulfilling of his responsibilities in
the contract. One of the key responsibilities is to ensure the prevention of the violation of
the warranties do not occur. For this, he himself, has to be well versed with terms and
conditions and make his employees well versed too. This would prevent the breaches
because everybody would know what to do and what not to do (Gurses, 2016). The
warranty surveyor should perform all the promises made, either by himself or through an
authorized agent to prevent the breaches to happen or continue.
3Ayres, Ian, and Ian Ayres, Studies in Contract Law (Foundation Press, 2012).
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Activity 2
1. Facts of the case: a shipper has an insurance policy which covers in its arena, the in
transit risks for a cargo ship. This belongs to Australia. The weather is becoming tough
and unsuitable. At that time, a sudden and important consignment is received for a cargo
ship. The weather would be rougher in the course of time. I am the shipper and I proceed
with the consignment because I do not want to let go the client.
Under the above case, the cargo ship possessed an insurance policy and which also
covered the in transit risks. In this case, there has been the occurrence of a breach of
warranty. There has been a violation of the conditions for the warranty because the
shipper was aware of the immediate as well as the proximate risks that were going to
come in future while the ship was on board. There would be an absence of the breach of
conditions of the warranty, had there been a sudden outburst of torrential natural disasters
without the knowledge of anyone. The shipper undertook the risk because he was
insured under the policy and did not want to earn a loss in the business. Despite knowing
the fact that there would be torrential activities he went ahead to proceed. Knowing the
intensity of the risk that the cargo ship could be completely totaled, he undertook the risk.
This resulted in the violation of the terms and conditions of the insurance policy and a
breach of warranty.
2. Facts of the case: the voyage was safe. The cargo ship delivered the goods safely. But
certain damages were observed by the client at the holding dock.
In this case, the insurer could ask for a breach of warranty. This is because the shipper
not only possessed the responsibility of delivering the cargo by ship but also possessed
the responsibility of delivering it safely. Though the damages were minor, yet there were
damages. This was the result of the violation of the conditions. The holding dock means
the place where the ships are parked. The damage was noticed there. However the
damage could have occurred also during the voyage or at the hold dock. Even if it was at
the holding dock, it was inside the ship and the shipper owed the responsibility to take
reasonable care of the cargo. Therefore, there was a breach of warranty and could be
issued.
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Activity 3
Facts of the case study:
The claimant started proceedings under the war risk insurance policy for a vessel known as B
ATLANTIC with regard to CONSTRUCTIVE TOTAL LOSS (CTL). Back in august 2007, the
vessel undertook cargo in Venezuela to transport to Italy. Under the pre departure investigation
in Venezuela, three cocaine bags were found attached to the hull of the ship, beneath the line of
water. After that, the ship was stranded in Venezuela. The underwriters stated that the vessel was
not a constructive total loss, but it was stated that the loss of the vessel was a danger insured
against. The insurance policy contained provisions for institute’s war and hull. The underwriters
laid emphasis upon the excluding of the clauses 4.1.5 of the institute war clauses. The claimants
stated that they were unaware of the cocaine bags and did not possess any business of trafficking
of drugs. The second officer and master were convicted of trafficking of drugs. The claimant
could not be convicted of the same offence and the case was motivated by politics. The claimant
finally stated that B ATLANTIC was detained and kept captive in Venezuela, as per the orders
of the higher authorities due to the involvement of the third parties through the addition of
noxious substances and drugs in the vessel. Under the law of Venezuela, the vessel was supposed
to be released on 31st October 2007 after the completion of the initial hearing of the parties in the
drug trafficking case. The continuous capturing of the vessel was in contradiction to the laws of
Venezuela and was thus, not the outcome of the local regulations.
Issues Involved:
The immediate issues involved in this case are whether B ATLANTIC, the vessel was
considered to be a CTL (Constructive Total Loss)? Another important issue which has arisen in
the case study is that whether or not, B ATLANTIC should be detained further? The laws are
different in different places, but should the law of Venezuela be followed? Another issue with
regard to the case study is that, the date of release of B ATLANTIC was passed long ago. What
would be the immediate remedies available to the vessel to be free?
Verdict of the case study:
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A Constructive Total Loss (CTL) in insurance for a vessel refers to an entirety of loss. The loss
is so extreme that the vessel cannot be put to further use ever. The price of repairing the loss
exceeds the price of the present value. When there is a constructive total loss of any ship or
vessel, it is considered to be a garbage which would not put to be in further use. It also includes
the claiming of insurance which has been set p for the value in the entirety with the associated
coverage. With reference to the above case study, the vessel B ATLANTIC could not be
considered as a constructive loss. This is because there were ample chances of the vessel to be
put to many uses in the future. Instead of detaining it and rusting it without fault, it can be put to
use. There were no damages which needed repair as well. Three bags of cocaine were found in
the hull of the vessel. This did not imply that the ship would be at a blissful loss. Thus, these
conditions clearly imply that the vessel, B ATLANTIC was not a constructive total loss (CTL)
(Anderson &Mostue, 2012).
The insurance policy did notinclude in itself, arrest, restraint, detainment, confiscation as per the
quarantine regulations or due to the violation of any norms or regulations with regard to trade.
As per the decisions of the judges in compliance with the war clauses and the hull clause, it was
stated that the hull’s cover when insured, would not be at par with the capturing of the vessel.
However, there is a proviso to this statement. The capturing could be justified if it was caused by
battery or pricy. In the above case there was neither piracy nor battery. In fact, the claimant was
completely unaware of the fact there were presence of cocaine in the vessel.
Reading the above case and examining the details of the case study, it can be concluded that the
vessel B ATLANTIC was wrongly detained in Venezuela. As per the laws of Venezuela, the
vessel should not have been detained by more than 2 months. The expected date was 31st October
2007, but it is still under captivity. Since the bags of cocaine were found in Venezuela, the laws
prevalent in Venezuela must have been followed. Extradition laws would not be applicable here.
Apart from this, the due examination and the investigation of the vessel and the parties involved,
accompanied with the required evidences and witnesses were recorded by the courts. Two of
them were proven guilty and convicted for the offence of trafficking of drugs and noxious
substances. The claimant was not proven guilty and thus was not convicted of the same. The
above reasons stated for B ATLANTIC and its immediate release from the wrongful
confinement of the authorities. The detaining of the vessel was not at par with the laws of
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Venezuela as well. Thus, there was an urgent need for the release of the vessel which had been
detained for a very long period and be put to some fruitful use.
As per the clauses of the Institute Voyage Clauses Hulls, the insurance covered a wide range of
perils. After a close perusal of the perils listed there, it is observed that perils with regard to the
trafficking of drugs is not covered under its arena. It is clearly stated that the insurance would not
cover under its area, the malicious acts. The trafficking of drugs is an offence and can be
included under the malicious acts. This is because the act of trafficking of drugs involved malice
in it. the malice was stooped to the level of not letting the claimant be aware of the presence of
the three bags of cocaine in the hull of the vessel4.
According to the Institute War Clauses (Cargo), the insurance covered many things except, the
provisions under clause 3 and clause 4 of the act. Moreover, the insurance under the War Clauses
did not include damage to subject matter because of the loss or damage caused due to civil war,
revolutions, political unrest and chaos in the society, armed rebellion or insurrection, any civil
strife which was against the government or the commission or omission of any act towards the
power of the government. It further included in this category the exclusion of detection of mines,
wars or other offensive weapons. It included the exclusion of arrest, detention, seizure,
confiscation or restraint or any act, which was a result of such commission. It can thus be stated
from the above criteria that the Institute War Clauses did not cover the risks or the problems
which B ATLANTIC was currently facing. The insurance was not covered in that arena for the
securing the release of the vessel from detention under the higher authorities which had brutally
kept the vessel under detention. Despite the wants of the claimant, the vessel was not released.
Despite the claimant being proved as a person who was not aware of the trafficking of drugs or
the claimant being a person who was not convicted of any offence, his wants were not granted by
the higher authorities of law5. This can be termed as gross injustice towards the owners of the
vessel. All their investment had dampened and they were facing severe loss without any fault on
4Dragos, NeaguIonut ‘RISK CONTROL-MARINE WARRANTY SURVEY’ (2012) 18(2)
Journal of Engineering Studies and Research 66.
5Jess, Digby Charles, The insurance of commercial risks: law and practice (Sweet & Maxwell,
2011).
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their part. B ATLANTIC did not deserve to e considered as a Constructive total loss at any
moment, but it was made to rust in the docks of Venezuela. It could not travel anywhere.
The local laws of Venezuela were for the decision of the release of the vessel after the
completion of the investigation and examination procedures. They had stated that the vessel
could be released by 31st October of 2007, after a detention of two months, starting from August
of the same year. Soon after the completion of the preliminary examinations the vessel was
bound to be released on the grounds of the decision of the local laws. But there had been the
presence of political motivation which intervened in such decision. The ongoing detention of B
ATLANTIC was contradictory to the local laws of the state. Thus, there was an immediate need
to release the vessel and make good the loss to the owners of the vessel as soon as possible. The
vessel could have been put to so other uses, instead of being labeled as a Constructive Total
Loss.
After a close perusal of the above case study, it can be concluded that the verdict must include
the immediate release of B ATLANTIC from the period of its ongoing detention since August
2007. It was not a Constructive Total Loss and it could be put to further use after inspection.
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Knowledge Questions
1. A marine warranty can be included under a policy many instances: Firstly, when the
holder of the policy ensures that certain things would or would not be done during the
life of the policy. Secondly, the marine warranties are included under the policies
when there are promises to, or not to perform certain things. Thirdly, a marine
warranty would be included under policies when there is an express mention of the
same to be included under it. These are the instances where marine warranty is
needed. When the assured possesses the increased value equipment exposed to marine
risks and the insurance is sought for that purpose. The activities of the surveyor also
plays an important role in this position. The equipment levels should be of a
minimum standard.
2. The fundamental ingredients of an insurance contract include the following:
A premium or a certain sum of money in return of consideration.
Against such consideration, a huge amount is guaranteed to be paid by the insurer who
has taken the premium.
The payment of money would be made in certain quantities of sum.
Such payment is fulfilled upon a contingent event.
Marine warranty implies the guarantee given over the goods used in the marine
transportation. It is a warranty upon the ships, boats, water carriers, cargoes and other
properties by mail or courier service through shipping in the seas.
3. A marine warranty implies that the voyage must be protected and insured under the
rules and regulations at par with the laws in force. Any condition in relation to it
should not be against it.
4. The warranty scope level can be decreased by the assured, upon the following terms:
when the assured claims to the insurer that before the ending of the contract, there are
other possibilities of the happening of a contingent event. Then, when assured
discloses to the prudent insurer about the fixation of the premium or whether there
would be a risk or not. The warranty scope level may not be reduced without
recommendation from the warranty surveyor without the former permission of the
insurer.
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6. The two operations coming under the warranty level include: Firstly, the operation of
voyage and time policies. Where the contract contains the insurance regarding the subject
matter at or from different places, it is the voyage policy and when the insurance has to
complete within a specific time it is a time policy operation. Secondly, another operation
is regarding the floating policy under the warranty level. This operation puts in the
description whereby the transfer that is, as it is said the floating of goods from one place
to another. These operations are included under the warranty level.
7. The differences between the certificate of approval and the certificate of conformity is
that the certificate of approval is more strict than the certificate of conformity. The
former makes a note of the personal accessories and the departments and the
manufacturers can record the same. Whereas, the certificate of conformity implies that all
the ending examiners and their accessories must fulfill all the targeted specifications
under a definite and fixed period of time. The Certificate of Authority needed by the
marine warranty should be obtained before the starting of the marine operation. This
certificate establishes the point that all the required documents have been submitted. The
certificate also reveals that all the standards of the marine operation have been followed
and they meet the standards of the industry. Thus, the above were the differences between
the certificates of approval and conformity6.
8. Breach of warranty refers to those conditions which violate the conditions to enable the
smooth functioning of a warranty. The terms and conditions which build the warranty is
not followed and thus there results in a breach. The ways in which a breach of warranty
could be curbed by the maintenance of the following factors. Clearly informing both the
conditions about the warranties and the punishment for a breach, maintaining the promise
as a promise and following every condition of promise strictly and emphasis should be
laid upon to understand the description of the conditions of the warranties very strictly.
9. For a cargo barge to travel to a new build tug from Indonesia to Brisbane the following
are the types of certification approval: the first type includes the stringent examination of
the goods supplied in the ships, once this examination is done, the approval be sought.
Secondly, the goods in the ships should be weighed properly to prevent over weight and
6Lowry, John, P. J. Rawlings, and Robert Merkin, Insurance Law: doctrines and principles
(Bloomsbury Publishing, 2011).
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risk during transport. Thirdly, all the taxes and the fees with regard to the transport of the
cargo barge should be paid with receipt. All these kinds, pass the certificates of approval
for the free transportation of goods7.
10. The different tasks of a marine warranty survey include the following: looking at the
maintenance of the marine warranties, conducting of a suitable survey which would
gather all important information and data are under the key roles of a marine warranty
surveyor. The survey further includes the off hire and the on hire surveys under them.
The next role with regard to the desktop review, is the reviewing of the important papers
and documents, conducting research, making the required calculations and measurements
accurately, revising the calculations made and the certificate of approval received. Thus,
the surveyor must perform these roles.
11. HAZOP stands for hazard and operability study and HAZID stands for Hazard
Identification. HAZOP is used to recognize the irregularities that arise while doing a
work in the environment. It deals with the most difficult challenges during work and
recognizes the root causes. While HAZID is more of a generalized character. It does not
go into the details like that of the former. It identifies all the threats at the earliest stage
without penetrating into the detailed version. It is made upon the analysis result. Thus,
these were the basic differences between the risk analysis tools of HAZOP and
HAZID8.
12. A safe work method statement (SWMS) refers to an instrument or a document which
portrays the increased risks under construction works and other activities which usually
take place in a workplace. The threats arising from such place is usually accumulated to
prevent the scattering of risks. The safe work method ensures that safety and security is
prevailed in the workplace among the employees. This method of safety is adopted by the
market warranty surveyor to ensure that all the tasks apart from the desktop department
are protected under the secured methods of safety9. 
7Ostrager, Barry R., and Thomas R. Newman, Handbook on Insurance Coverage Disputes
(Aspen Publishers Online, 2012).
8Rose, Francis, Marine insurance: law and practice (CRC press, 2013).
9Thomas, Rhidian, ed, The modern law of marine insurance: Volume four (CRC Press, 2015).
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13. The types of data used under the review of a warranty survey includes all the
complimentary claims, supplementary information, conclusive data regarding the
qualities of the products and the goods. There should be supremacy in the products used,
with the provision of appropriate data. The kinds of data should include relevant
information regarding the anticipation of the product quality, their alterations as per the
needs of the consumers, the threats and information relating to hazards at the earliest
possible way are inclusive under the types of data. Thus, these are under the types of data
under the review of a warranty survey program which include monitoring and regulation
of data, interim results, feedbacks and the timelines.
14. The differences between the evaluation and monitoring and their application towards the
review of a marine warranty survey largely depends upon the timing and the emphasis
laid upon the assessment. Monitoring under the marine warranty survey review lays
down emphasis upon the happenings and the non happenings in a particular time of the
working at a workplace. While, evaluation under the marine warrant surveyor review
takes place at certain intervals and upon specific points under a specified time to have a
knowledge and understanding upon the assessment in the workplace. It aids in the
improvement of the ultimate consequences.
The measures to prevent the breach of warranty must be efficient and must prevent all kinds of
violation against the warranties. It includes those measures which would solve the problems with
regard to the violation. Imposing stringent punishments and hefty compensations could be
efficient in aid of breach of warranty. Understanding the terms and conditions of the warranty so
that the parties are not negligent or commit any breach out of ignorance. Maintaining that a
promise needs to be performed at all costs without failure is necessary to prevent the breach of
warranty from taking place10. A breach of a warranty implies the violation of the terms of the
warranty clauses. For this purpose, the measures that can be undertaken are the issuing of COA,
regulation and monitoring of all the aspects of the procedure of warranty operation and interim
reporting at every stage. There can be risk management teams for the purpose of issuing thses
data. To a warranty surveyor, the site attendance holds a very important position. The site
attendance includes the visiting of the particular sites at certain intervals. The sites need to be
10Jing, Zhen, Chinese Insurance Contracts: Law and Practice (Informa Law from Routledge,
2016).
Andrew Hughes