Question 1
This is a case study question where the candidates were required to read, understand and apply their knowledge of the insurance principles, rudiments and fundamentals in solving practical real-life problems posed in the case of TYC Liners Limited, Sea Pirates on Rampage as related in the following questions:
- Identify and explain two principles of insurance involved in this case.
- Identify and explain two classes of insurance which TYC Liners would take to cover its operations.
- Explain the proximate and remote causes of damage to the ship.
Observation
Majority of the candidates attempted the question and a good number of them performed well in (1b). However, majority of them exhibited poor understanding and expression of points in the application of the principles and causes of damage to the ship in (1a & c).
Some of the suggested responses were:
(a) The principles involved in the case
(i) Insurable interest: It relates to the legal right to insure arising from the
financial relationship between the insured and the subject matter of
insurance which must be recognized at law.
(ii) Proximate cause: This deals with identifying the perils that were responsible
for the loss of or damage to the subject matter of insurance and establishes the insured perils and separate them from the excepted perils.
(iii) Indemnity: This is the principle that ensures the return of the insured to the financial position he was before the occurrence of the loss.
(b) (i) Marine Hull Insurance: This provides insurance cover for the vessel and machinery damage against losses caused by sea perils.
(ii) Marine Cargo Insurance: This provides cover for loss of and damage to goods carried by the vessel which may be caused by the sea perils.
(iii) Freight cover: It covers the risk faced by the ship-owners to pay back the cost of carriage if the cargo is lost in transit while in the sea.
(iv) Liability cover: It provides compensation for bodily injury and damage to third party property arising from the usage of the ship and other port facilities.
(v) Fire and Special Perils: It provides cover to insured properties which may be destroyed as a result of fire outbreak, lightning, explosion and allied perils.
(vi) Theft (Burglary) Insurance: It provides cover for properties dishonestly taken away from the owner by another person with the intention of permanently depriving him of the use of it.
(vii) Goods-in-Transit Insurance: It provides cover for loss of or damage to goods while being conveyed from one location to another, or being loaded or unloaded or temporarily housed in the ordinary course of transit through road, rail, inland water ways, etc.
(viii) Engineering Insurance: It protects the insured against misfortune of machinery breakdown, accidental damage to electronic equipment and construction work.
(c) (i) The attack by the sea pirates is the proximate cause of the damage to the ship.
(ii) The rescue operation by the navy is the remote cause of the damage to the ship.