Published Article

A Primer on Marine Insurance

August 19, 2025

Marine insurance is the oldest form of insurance, tracing its origins to Roman shipowners engaged in international trade. Ocean marine insurance was written as early as the 14th century, not by insurance companies, but by merchants who procured and wrote marine insurance as a side line to other commercial endeavors and trades. In 17th-century England, Edward Lloyd’s coffeehouse on Tower Street in London became the most prominent location where shipowners would gather to seek insurance for their vessels and voyages. Eventually, Lloyd’s moved to London’s financial district and “Lloyd’s of London” became the largest exporter of marine insurance in the world. See Jeremy A. Herschaft, “Not Your Average Coffee Shop: Lloyd’s of London–A Twenty-First Century Primer on the History, Structure, and Future of the Backbone of Marine Insurance,” 29 Tul. Mar. L. J. 169 (Summer, 2005).

Key Principles in Marine Insurance

Predictability is a central premise of marine insurance. Insurers rely on information provided by the insured to foresee risks relating to a given marine undertaking. This reliance is reflected in the doctrine of uberrimae fidei,or utmost good faith, which provides that the insured is bound to disclose every fact within the insured’s knowledge that is material to the risk. Failure by the insured to disclose all available information makes the insurance contract void ab initio, permitting the insurer to void the policy. David J. Sharpe, David B. Sharpe and Peter Winship, Cases and Materials on Admiralty, Ch. 3 (West Academic Publishing 2006).

Warranties are another important element of marine insurance. A warranty, which may be express or implied, is a promise by the insured that certain conditions shall be fulfilled, or that a particular set of facts is true. Express warranties are those written into the policy, such as warranties establishing geographical limits (navigation or trading warranties). Regarding implied warranties, marine insurance recognizes three: the warranty of seaworthiness of the vessel, the legality of the marine venture, and the warranty against any deviation during the voyage. See William C. Baldwin and C. Barrett Rice, “Breach of Warranty and Misrepresentation-USA,” 87 Tul. L. Rev. 1049 (2013). 

Types of Marine Insurance

Virtually all forms of marine insurance involve elements of vessel ownership, operation, or the transportation of cargo. The contract of marine insurance is, in essence, a contract of indemnity against the risks or perils inherent to the maritime industry and oceangoing commerce. See Grant Gilmore and Charles L. Black Jr., The Law of Admiralty, Chapter II (The Foundation Press, 2nd Edition 1975). The three most common types of marine insurance are hull, cargo, and protection and indemnity.

Hull Insurance 

A hull policy covers the vessel, its machinery, and certain liabilities for collision, as well as sue and labor, general average, and salvage. For commercial vessels, hull policies typically insure against physical damage and losses from certain “named perils” specifically listed in the policy. In contrast, hull insurance for pleasure vessels covers “all risks” of loss, meaning physical loss or damage by fortuitous circumstances. See Jean E. Knudson, “The Hull Policy Today,” 75 Tul. L. Rev. 1597 (2001).

Coverage under hull policies also includes vessel appurtenances such as equipment that is installed in a ship for which the insured is responsible. War risks are ordinarily excluded from hull policies, but are typically added back through the Free of Capture and Seizure (FC&S) Clause, which covers war perils, civil war, rebellion, and revolution.

The so-called Inchmaree Clause (also known as the Additional Perils Clause) extends the list of covered perils to include losses caused by the negligence of the master, officers, or crew. The clause also adds coverage for damage arising out of latent defects in the vessel’s hull or machinery.

Another provision of hull policies is the Running Down Clause, which delineates the policy’s coverage for third-party liabilities of the shipowner arising out of collisions. The cover is limited to third-party damage; that is, damage to the other (not the insured’s) vessel. Historically, the collision liability coverage under hull policies was limited to a fraction of the total collision damages, usually 75% of the claim. This was meant to serve as an incentive to shipowners to engage in safe navigation practices.

Cargo Insurance    

A cargo insurance policy indemnifies the exporter or importer of cargo in the event of damage, loss, or theft during transit. The typical cargo policy provides coverage for specified perils, and the duration of coverage is confined to ocean transit. However, coverage may be expanded to provide landside risks on a “warehouse-to-warehouse” basis. An even broader protection is available with “all risk” coverage, which provides coverage for physical loss or damage to the cargo resulting from any external cause.

Protection and Indemnity Insurance   

Protection and indemnity (P&I) insurance provides coverage for a vessel owner or operator’s legal liability to third parties, including personal injury to crew or passengers, pollution, or damage to other vessels or landside structures. P&I policies insure against specific, named risks enumerated in the policy. Unlike general liability policies, P&I policies are indemnity policies that only pay sums that the policyholder is liable to pay on account of a covered risk. The MLA Report (Marine Protection and Indemnity Project), Doc. No. 761 (2001).

American P&I insurers generally rely on standard policy forms when issuing coverage. However, a significant portion of the P&I market is composed of P&I “clubs.” Clubs usually do not issue policies of insurance; instead, coverage details are set forth in the association’s “Rules,” which effectively function as policy language. The Rules also address issues such as premiums (calls), reserves, meetings and disputes. Ships are “entered” (meaning that they become insured) if the club accepts the vessel. See Norman J. Ronnenberg Jr., “An Introduction to the Protection & Indemnity Clubs and the Marine Insurance They Provide,” 3 U.S.F. Mar. L. J. 1 (1991).

In maritime contracts, it is common to require that the vessel owner or operator name other parties as additional insureds under a vessel’s P&I policy. However, additional insured coverage usually only extends to the additional insured if there is a causal operational relationship between the vessel and the resulting injury to a third party. See Lanasse v. Travelers Insurance, 450 F. 2d 580 (5th Cir. 1971). In the offshore setting, special endorsements and exclusions may also come into play regarding pollution liability. See R.C. Springall, “P&I Insurance and Oil Pollution,” 6 J. of Energy and Natural Res. L. 25 (1988).

A number of risks or occurrences are commonly excluded from P&I coverage, including risks covered under hull policies, loss of freight or charter hire, deviation or termination of the voyage short of its destination, fraudulently issued bills of lading, breach of contract, and improper stowage, among others.

Other Types of Marine Insurance 

In addition to coverage available under standard hull, cargo, and P&I policies, specialized coverages have evolved to meet the demands of particular segments of the maritime industry. See Raymond P. Hayden and Sanford E. Balick, “Marine Insurance: Varieties, Combinations, and Coverages,” 66 Tul. L. Rev. 311 (1991).

Builder’s risk coverage is designed to protect shipyards against “all risks” of physical damage during the construction of vessels or other marine structures. Ship repairer’s liability coverage protects shipyards from third-party claims while vessels in the insured’s care, custody, and control are being worked on.

Charterer’s liability insurance provides coverage similar to hull and P&I policies, but also includes safe berth or port warranty coverage, which may be required by a charter party. The coverage typically extends to vessel damage and detention, as well as indemnities connected with the possession, arrangement, navigation, and operation of the vessel.

Stevedore, wharfinger, and terminal operator liability policies cover risks associated with terminal operations, including liability to vessels, demurrage claims, and damage to pier facilities. Claims for personal injury, damage to vessels owned by the insured, and liability for handling hazardous cargoes are typically excluded.

In some cases, comprehensive general liability (CGL) policies are endorsed to provide coverage for marine risks, including contractual liability arising from indemnity agreements involving marine operations.

Although employers typically carry workers’ compensation and employer’s liability (WC/EL) insurance, additional coverage is generally obtained through maritime employer’s liability (MEL) policies or endorsements for claims for personal injury or death arising under the Longshore and Harbor Workers’ Compensation Act or the Outer Continental Shelf Lands Act, including Section 905(b) claims for vessel negligence. See 33 U.S.C. 901 et seq., and 43 U.S.C. 1331 et seq.

Future Trends in Marine Insurance

Marine insurance is always evolving to meet the needs of the modern marine industry. Trends in marine insurance include coverages relating to cybersecurity threats, geopolitical conflicts, and environmental liabilities. Marine insurers are also increasingly relying on artificial intelligence in both underwriting risks and claim handling.

Digitized supply chains, stricter regulatory compliance, the potential impact of tariffs on global trade, the development of automated vessels, and the nascent wind energy industry all present greater risks, but also opportunities for innovation and growth that will shape the future of marine insurance.

Reprinted with permission from the August 19, 2025, issue of The Legal Intelligencer. © 2025 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.