PRINCIPLES OF LAW OF

INSURANCE

07/13/16

Dr. Oscar Kikoyo, Advocate

Executive Secretary,
SUMATRA Consumer Consultative
Council,
P.O BOX 14154,
DAR ES SALAAM.

Why Law of Insurance?

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Why Law of Insurance?

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Why Law of Insurance?

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Introduction
Business is a hazardous road, hence the
business has to drive with caution and
proper planning to get at his destination of
prosperity through profits.
All along the road it takes are innumerable
risks.
Some of these risks are borne by the
business man/woman as a part of the
game, others are shifted by him/her to
agencies or persons willing to share them.
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Why Law of Insurance?

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Introduction
Insurance is a way of shifting the
risks to insurers.
Insurance is thus a co-operative way
of spreading risk

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Why Insurance?

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What is Insurance?
Insurance is defined as a contract
either to indemnify against a loss
which may arise upon the happening
of some event, or to pay on the
happening of some events, a sum of
money to the person insured.

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What is Insurance Cont.

It is defined as a contract whereby
one person called the insurer
undertakes in return of the agreed
consideration called premium to
pay to another person called the
assured a sum of money or
equivalent on the happening of a
specified event.
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What is Insurance Cont.

Insurance can further be defined as a
social device for reducing risks by
combining a sufficient number of
exposure units to make their
individual losses collectively
predictable.
Predictable loss is shared
proportionately by those in the
combination.
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What is Insurance Cont.

It is further defined as risk transfer
mechanism that ensures full or
partial financial compensation for the
loss or damages caused by event(s)
beyond the control of the assured
party.

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What is Insurance Cont.

Under an insurance contract, a party
(the insurer) indemnifies the other
party (the insured) against a
specified amount of loss, occurring
from specified eventualities within a
specified period under the policy.

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What is Insurance Cont.

Insurance compensation is normally
proportionate to the loss incurred.
In life insurance, usually a fixed sum
is paid.
Insurance provides protection against
tangible losses.
It cannot insure continuity of
business, market share etc.
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What is Insurance Cont.

Insurance may be defined as a cooperative
device to spread the loss caused by a
particular risk over a number of persons
who are exposed to it and who agree to
insure themselves against that risk.
This means insurance provides a pool to
which many contribute a certain sum of
money called premium, and out of which
the few who suffer losses are
compensated by the insurer.
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What is Insurance Cont.

There are two parties to a contract of
insurance:- Insurer & Insured.
The person undertaking the risk is
called the insurer, assurer or
underwriter.
The person whose risk is insured is
called insured or assured.
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Financial definition
Insurance is a financial arrangement that
redistributes the cost of unexpected
losses. It involves the transfer of potential
losses to an insurance pool.
The pool combines all potential losses and
then transfers the cost of the predicted
losses back to those exposed.
Thus an insurance system redistributes the
cost of losses by collecting premium
payments from every participant (insured)
in the system.
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Financial definition Cont.

In exchange for the premium
payments, the insurer promises to
pay the insureds claims in the event
of a covered loss.
Therefore an insurance system
redistributes the cost of losses by the
unfortunate few members to all the
members of the insurance system
who pays premium.
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Legal Definition
Insurance is a contractual arrangement
whereby one party known as insurer
agrees to compensate another party
known as insured for losses insured
against.
It is the branch of law of contract and the
contract of insurance is known as policy.
It creates rights and corresponding
obligations for those who are parties to it.
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Legal Definition Cont.

It is a contract whereby one party
undertakes, in return of a
consideration called premium, to pay
to the other party a certain sum of
money on the happening of a certain
event or to indemnify the other party
against a loss arising from the risk
insured. M C Kuchhal
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Legal Definition Cont.

Insurance is essentially a contact between two
parties.
The first party is the
assured, insured or policyholder:

The second party is

the insurance company, insurer or underwriter:

These names are all used interchangeably and are

all synonymous with the party agreeing to take on
the risk of the assured in return for a premium.
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Legal Definition Cont.

According to Castellain Vs Preston (1883) II
Q.B.D 380, it was held that the aim of all
insurance is to make provision against the
dangers which beset human life in
dealings. Those who seek it endeavour to
avert disaster from themselves by shifting
possible losses on to the shoulders of
others who are willing for the money or
some other consideration to take the risk
off them and in the case of life assurance
they can assure to those dependent on
them a certain provision
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Legal Definition Cont.

Insurance firms undertake risks at a
price, and upon calculation, which
after adjustment leaves them after
providing against all contingencies, a
fair profit.

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Premium
Insurance is a contract whereby, for
specified consideration, one party
undertakes to compensate the other
for a loss relating to a particular
subject as a result of the occurrence
of designated hazards.

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Premium Cont.
A contract is considered to be
insurance if it distributes risk among
a large number of persons through
an enterprise that is engaged
primarily in the business of
insurance.

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Premium Cont.
In an insurance contract, one party,
the insured, pays a specified amount
of money, called a premium, to
another party, the insurer. The
insurer, in turn, agrees to
compensate the insured for specific
future losses. The losses covered are
listed in the contract, and the
contract is called a policy.
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Premium Cont.
When an insured suffers a loss or
damage that is covered in the policy,
the insured can collect on the
proceeds of the policy by filing a
claim, or request for coverage, with
the insurance company.

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Premium Cont.
The company then decides whether
or not to pay the claim. The recipient
of any proceeds from the policy is
called the beneficiary. The
beneficiary can be the insured
person or other persons designated
by the insured.

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Premium Cont.
The business of insurance is
sustained by a complex system of
risk analysis. Generally, this analysis
involves anticipating the likelihood of
a particular loss and charging
enough in premiums to guarantee
that insured losses can be paid.

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Premium Cont.
Insurance companies collect the
premiums for a certain type of
insurance policy and use them to pay
the few individuals who suffer losses
that are insured by that type of
policy.

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Types of Insurance
Life Insurance
Fire insurance
Marine Insurance
Third Party Motor Insurance

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Regulation of transport
insurance sector
The transport Insurance sector in Tanzania
is regulated by Tanzania Insurance
Regulatory Authority (TIRA). The regulation
of insurance market existed since its
liberalization 1996.
The Insurance Act of 1996 was a product
of the insurance market liberalization.
The objectives of the Act was to create a
comprehensive regulatory regime of the
Insurance market including the transport
insurance market.
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Transformation of
Insurance Act
The Act of 1996 established Insurance
Supervisory Department (ISD) which was the
Government Agency to oversee and supervise the
Insurance market in Tanzania.
However it was important for the former ISD to be
independent from the Government to bring about
effective regulations of the insurance market.
The new Insurance Act was enacted in 2009 and
came into force on July 2009.
The declaration of the effective date was done
through the Government Notice No. 266 of 24th
July 2009.

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Salient features of the new

Act
The new Act is establishing an independent
regulatory authority departing totally from the
previous Act which established and agency of the
government known as Insurance Supervisory
Department (ISD).
This is a requirement under the International
Association of Insurance Supervisors (IAIS).
Commissioner and Deputy Commissioner of
Insurance are now being appointed by the
president
Establishment of special insurance tribunal known
as Ombudsman services (section 122). This is a
quasi-court under the Act to adjudicate insurance
matters
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Salient features of the new

Act
Establishment of Appeals Tribunal
which is a body to deal with all
appeals cases (see section 126).
Establishment of the independent
board of the authority
Consultation with stakeholders during
formulation of new industry regulation
or amendments of the same.
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Tanzania Insurance Regulatory

Authority
Tanzania Insurance Regulatory Authority is
established under section 5 of the
Insurance Act of 2009.
Establishment of Authority paves a way for
enhancement of the supervision and
regulation of the insurance industry.
The Authority takes over the role and
duties of the former Insurance Supervisory
Department (ISD) established by the
Insurance Act of 1996 as revised in 2002.
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General Duty of the

Authority
To promote and maintain an efficient,
fair, safe and stable insurance
market for the benefit and protection
of policy holders.

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Mission and Vision of

TIRA
TIRAs mission is to develop, promote
and maintain an efficient, fair, safe
and stable insurance market for the
benefit and protection of policy
holders.
TIRAs vision is A skilled, efficient
and credible insurance industry

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Functions of TIRA
Coordinate and implement policies on
insurance matters
Regulate and coordinate activities of
insurers, brokers and agents
Specify the code of conduct for members of
the insurance industry
Effect supervision and monitoring of
insurers, brokers and agents
Set standards in the conduct of the business
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FUNCTIONS OF TIRA
Ensure proper observance of the
code of ethics and practice by
insurers, brokers and agents
Protect the interest of policy holders
Specify requisite qualifications for
members of the insurance industry
Prescribe levies on premiums and
commissions to ensure adequate
funding for the Authority
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Key Players
Regulator (TIRA)
Insurance Companies
Insurance Brokers
Insurance Agents
Policy holders
Government
Other Regulatory Bodies
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SUMATRA
Surface and Marine Transport
Regulatory Authority is established
under SUMATRA Act of 2001.
SUMATRA is a corporate independent
body which regulate road, marine
and railway transport in Tanzania.

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Duties of SUMATRA
Promote effective competition and economic
efficiency
Protecting the interests of consumers
Protecting the financial viability of efficient
suppliers
Promoting the availability of regulated
services to all consumers including low
income, rural and disadvantaged consumers
Public awareness
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Functions
To issue, renew and cancel licenses
To establish standards for regulated
goods and regulated services
To set standards for the terms and
conditions of supply of the regulated
goods and services
To regulate rates and charges
To make rules
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Insurance matters under

SUMATRA
During issue and renewal of licenses of
various operators, it is a regulatory
requirements under SUMATRA regulations
for the operators to have adequate
insurance to cover them with various risks
and liability.
Failure to provide adequate insurance
requirements shall lead to the rejection of
application to operate
The insurance categories covers cargo or
goods, hull and personal effects.
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TCAA
The Tanzania Civil Aviation Authority
(TCAA) was established under the Tanzania
Civil Aviation Authority Act of 2003.
The Act was revised in 2006 and merged
with the Civil Aviation Act, cap 80 of the
laws.
The Act gives effect to the Chicago
Convention of 1944 and provides for the
control, regulation and orderly
development of civil aviation in Tanzania.
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TCAA

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Responsibilities
Regulates activities of persons and
institutions carrying out Air Transport services.
Carriage of passengers and cargo, both domestic and
International
Aeronautical airport services (airport operators, ground
handlers, cargo operators, hanger facilities, airport
security, in-flight caterers and aircraft fuelling services)
2. Air navigation services (includes air traffic services and
associated infrastructure, and aeronautical
meteorological services)
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Functions of TCAA
To issue, renew and cancel air operators
licenses
To establish standards for regulated goods
and regulated services
To set standards for the terms and
conditions of supply of the regulated
goods and services
To regulate rates and charges
To make rules
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Regulation of Insurance Matters

During the application for an Air Operators
Certification (AOC) and Air Service
License (ASL), the operators is required to
submit insurance documentation to cover
them with various risks and liability.
Failure to comply with insurance
requirements shall lead to Authority
rejection to grant an AOC or ASL.
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Who has insurance?

Ask yourself:
What kind of insurance do you
have?
Why do you have it?

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Before buying insurance

Identify the potential risks that you are exposed
to.
By examining and evaluating risk you are likely
to be more careful and prudent since
appreciating risk is one step closer to acting
more cautious.
Having a good risk management policy makes
good business practice.
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What is risk?
We are all at risk and some more than others!
The Japanese eat very little fat and suffer fewer
heart attacks than the British or Americans.
On the other hand, the French eat a lot of fat and
also suffer fewer heart attacks than the British or
Americans.

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Risk
The Chinese drink very little red wine and suffer
fewer heart attacks than the British or
Americans.
The Italians drink excessive amounts of red wine
and also suffer fewer heart attacks than the
British or Americans.
Conclusion: Eat & drink what you like.
It's English that kills you .
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What is risk?

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A definition of risk
The possibility of suffering harm or loss; danger.
It is a probability or threat of damage, injury, liability, loss,
or any other negative occurrence that is caused by external
or internal vulnerabilities, and that may be avoided through
preemptive action.
A factor, thing, element, or course involving uncertain
danger; a hazard.
a. The danger or probability of loss to an insurer.
b. The amount that an insurance company stands to
lose.
a. The variability of returns from an investment.
b. The chance of non-payment of a debt.
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Origins

The origins of insurance go back a long

way, the Phoenician traders around 1,000
BC were probably the first to adopt
insurance-like practices.
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What can be insured?

All risks cannot be insured. The following must
be present:
an insurable interest
Insurance is limited to financial value
a large number of similar risks
Losses must not be catastrophic
Losses must not be too small
Losses must be reasonably unexpected
Losses must be accidental
It must be consistent with public policy
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Primary functions of insurance

To spread financial losses;
The insurer, as owner of the fund, benefits
from investment income and any profits
made;
Both the assured and insurer gain from
the proper fulfilment of the contract.

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Secondary functions of insurance

Releasing funds otherwise tied up in
reserves;
Investment by insurers;
Removing fear and establishing
confidence;
Means of saving (life insurance);
Reducing the cost of social services;
Invisible exports.
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Top Ten Insurance Companies in

World 2011

1. American International Group (AIG) Country: United States Market Value: $172.24 billion
2. AXA Group Country: France Market Value: $66.12 billion
3. Allianz Worldwide Country: Germany Market Value: $65.55 billion
4. Manulife Financial Country: Canada Market Value: $50.52 billion
5. Generali Group Country: Italy Market Value: $45.45 billion
6. Prudential Financial Country: United States Market Value: $39.70 billion
7. MetLife Country: United States Market Value: $37.94 billion
8. Aviva Country: United Kingdom Market value: $33.10 billion
9. Munich Re Group Country: Germany Market Value: $30.99 billion
10. AEGON Counry: Netherlands Market Value: $26.40 billion

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Six Principle of Insurance

1)
2)
3)
4)
5)
6)

Insurable Interests,
Indemnity
Uberrimae Fidei
Causa Proxima
Mitigation of Loss
Doctrine of Subrogation

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1. Insurable Interests
Insurable interest means that in
order for the insured to start an
insurance policy, he/she must have
an ownership or financial interest in
whatever it is he/she wants to
insure. This keeps people from
taking insurance policies out or
making claims that don't directly
affect them.
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Insurable Interest:In contracts of insurance for one to be

compensated has to prove that at the time
of risk attaching to the subject matter of
insurance, he had an insurable interest,
that is, an interest in the object capable of
being quantified in monetary terms. See
Macaura v. Northern Assurance Company
(1925) AC 619
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Illustration (Macaura v. Northern)

Macaura owned a timber of high value. He was
worried that his timber could catch fire and put
him at loss. He formed a company together with
his relatives. The share capital that Macaura
contributed was his timber. Macaura became a
director of the company and his shares
amounted to 98% of all shares. Again he was
worried about fire to his timber and took a fire
policy against his timber in his name. After a
short time the timber caught fire. He went to
Insurance company to claim indemnity.
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(Macaura v. Northern)
The court throwing over board his claim held that
Macaura as an individual could not insure the
property which belonged to the company, what
he could have done was to insure the property to
the tune of his shares and not otherwise. The
court went on saying that if a trader forms his
business into a limited liability company, he
ceases to have an insurable interest in the
assets transferred even if he owns all the shares
for the company.
He has separate existence
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Incidence of insurable interest

Where the insured is the owner
Where one keeps goods of another
bailor and bailee relationship.
Where goods are in physical possession
of hirer

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2. Indemnity

Indemnity is one of the fundamental principle of

the insurance contract.
The principle is restoring the insured in a
position in which he was before the loss was
sustained without enriching him.
In case of marine, aviation, motor vehicle or
railway insurance, the insurer will indemnify the
insured for loss or damage resulting from
specified perils. In case of a loss the insured
can recover from the insurer the actual amount
of loss, not exceeding the amount of policy.

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Illustration (AON v. Majid Batenga )

Batenga the owner of mini bus for passengers
services had his bus stolen from the parking
yard. After three months of investigation the mini
bus could not be found. The Insurer indemnified
Batenga and the file was closed. One year later
the mini bus was found in Bagamoyo and
Batenga was notifies of the same. He returned
the vehicle in his possession. AON got to know
about the fact and sued Batenga
Held: AON indemnified Batenga over the mini
bus loss and it was unlawful for Batenga to repossess the bus after indemnity
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3. Uberrimae Fidei
Uberrimae Fidei, or utmost good
faith," means that the insurer is
dependent on you, the insured, to
disclose any relevant information
about yourself or whatever it is you
are insuring. If you want to get health
insurance, good faith means that you
will disclose any previously existing
health conditions.
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3. Uberrimae Fidei
Insurance contracts are contracts of utmost good
faith or contracts of uberrimae fidei.
It is the inherent duty of both parties to a contract
to make full, true and fair disclosure of all
material facts relating to the subject matter of the
proposed insurance.
It is so because insurance shifts risk from one
party to another. This duty requires the insured to
unfold all facts to enable the insurer assess the
situation in terms of risk involved, premium
payable, whether to insure the item or not.
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3. Uberrimae Fidei
The principle of uberrimae fidei may be
breached in two ways: by non-disclosure
of the material facts due to forgetfulness,
or carelessness or it may be due to
intentionally hiding the information
(concealment).
Either way, the contract becomes null and
void.
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4. Causa proxima
The insurer is liable only for those losses which
have been proximately caused by the peril
insured against.
In other words in order to make the insurer liable
for the loss, the nearest or immediate or last
cause is to be looked into, and if it is the peril
insured against, the insured can recover.
Insurers are not liable for remote causes and
remote consequences. See Pink v. Fleming
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Illustration (Pink v. Flemings)

In a marine policy, the cargo was a
shipment of oranges. The peril insured
was collision with another ship. The ship
collided with another ship resulting in
delay and mishandling of shipment which
made oranges unfit for human
consumption. It was held that the loss was
due to mishandling and delay and not
collision which was a remote cause.
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Illustrations (Air Ukraine v. Kiev

Insurance Company)
Air Ukraine leased Antonov 234 from
Aeroflot for one month for an emergency
operations between Kiev and Minsk. The
plane collided with forklift at the airport.
The aircraft was insured against plane
crash accidents.
It was held that there was no causa
proxima in that incidents
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5. Mitigation of loss
When the event insured against occurs, for
example, in the case of a fire insurance policy
when fire occurs, it is the duty of the policy to
take steps to mitigate or minimize the loss as if
he were uninsured and must do the best for
safeguarding the remaining part of damage,
otherwise the insurer can avoid the payment of
loss attributable to his or her negligence.
The insured is entitled to claim compensation for
the loss suffered by him or her in taking such
steps.
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Illustration (Abushiri v. Mombasa

Insurance)
In a marine policy, the vessel was insured
against fire and the ship caught fire in its
stern in the outskirt of Mogadishu. The
plaintiff did not take any action to
extinguish the fire and instead ordered
some of his crew to intensify the fire.
It was held that the fire was caused by the
plaintiffs action not mitigate the loss.
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6. Doctrine of subrogation
Subrogation is the legal substitution of one
person in anothers place. In insurance,
subrogation gives the insurer the right to collect
from third party after paying insureds claims.
A typical case of subrogation arises in transport
vessels insurance collision claims. If As
passengers bus is responsible for a collision with
Bs passengers bus, B may sue A for damages
or may collect from her automobile collision
insurance. If she chooses to collect from her
own insurance, insurance company is
subrogated to Bs right to sue A.
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A typical automobile insurance provides

the following:
in the event of any payment under this
policy, the company shall be subrogated to
all the insureds right of recovery the
insured shall do nothing after the loss to
prejudice such rights.

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7. Willful Misconduct
The contract of insurance do not provide
for indemnity to the insured if the loss or
damage was caused by willful misconduct
of the insured.
The loss must arise from a genuine event
without any element of willful misconduct.

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Abdallah liundu v. Alliance

Insurance
Liundu who was the owner of the fishing
vessel in Msanga Mkuu, Mtwara region
set the fire on his own fishing boat which
was insured against fire. During his claim
determination it was proved and ruled that
the fire was caused by willful misconduct
of the insured and his claims for
compensation were dismissed.
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8. Risk Must attach

The last principle is the one relating to the
specific risk which was insured. In the
event of loss, the claimant must prove that
the risk insured is attached to the subject
matter.
In other words you can not claim for
compensation for the risk which is not
attached to the one which was insured.
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Illustration (Samuel Mganyanga v.

Heritage Insurance)
Mganyanga insured his vehicle against loss or
damage of his vehicle upon accident
occurrence. The vehicle got an accident near
Segera and Mganyanga lost his leg. He was
claiming to his insurer for the damage to his
vehicle and personal injuries.
It was ruled that Mganyanga was entitled for
compensation to his vehicle only. Personal
injuries was not attached to the risk insured.
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Types of Insurance
Insurance business is divided into two types
Life Assurance
General Insurance
Transport Insurance falls under the general insurance
categories. Marine insurance stands on its own as a
subdivision of general insurance. Motor vehicles,
aviation and railways insurances falls under
miscellaneous insurance which is a subdivision of
general insurance.

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Insurance Company
This is an insurer or underwriter through
contractual agreement, undertakes to
compensate specified losses, liability or
damages incurred by another individual.
They may have various insurance agents
working under them and may also sell
their policies to independent insurance
brokers.
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Insurance Brokers
Insurance broker means a person, who is acting with
complete freedom as to his choice of undertaking and for
commission or other compensation and not being an
agent of the insurer.
They bring together, with a view to the insurance or
reinsurance of risks, persons seeking insurance or
reinsurance services.
The key feature here is that they are independent from
the Insurer and work totally independent.
A broker generally has no contractual agreements with
insurance companies.
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Insurance Agent
This is a person who solicits applications for
insurance, collect moneys or premium and
acting in accordance with agency agreement
with the principal insurer and work according to
the policy of the principal insurer.
They are agents of insurer and do not work in
total freedom from the principal.
They may or may not sell business of others
insurance company, it depends whether the
agents agreement allows that or not.
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Transport Insurance
Transport insurance is a contract under which
one person (the insurer) is legally bound to pay
a sum of money or its equivalent to another
person (the insured), upon the happening of a
specified event involving some element of
uncertainty as to time or likelihood of occurrence
in transportation undertakings, which affects the
insureds interest in the subject-matter of the
insurance.

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Transport Insurance
As with any commercial transactions, in
transportation there are risks associated
with carriage of goods or passengers from
one point to another.
For insurance cover to be valid, you have
to be able to show that you have insurable
interest in the insured subject. This means
showing that the goods are yours and that
you bear the risks associated with them.
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Risks
There are three main risks that arise in
carriage of goods: Loss, Damage and
Delays
In the carriage of passengers the risks
involved are: Delays, Loss or Damages
to baggage, Death and Bodily injuries
On the side of transporter the risks
involved are: Loss, Damage, Delays,
Death and Bodily Injuries of the crew
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Importance of Insurance
In transportation carriers enjoys limited
liability when they cause damages to
cargo, goods or passengers.
To avoid losses due to limited amount of
compensation in a distinct event,
insurance is paramount or a permanent
solution.

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Transport Insurance
There are four types of transport
insurance. These are aviation, road,
marine and railway insurance.

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Aviation Insurance
Aviation insurance is an insurance
coverage which geared specifically to the
operation of aircraft and the risks involved
in aviation. The risks can be loss or
damage to aircraft itself or loss or damage
to passengers, their luggage or damage to
cargo.

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Aviation Insurance
Insurance is an essential means of protecting the
aviation industry against accidental loss or damage.
It is an instrument of enabling aircraft financiers and
lessors to protect their property interests in financed and
leased aircraft.
The Lloyds of London or the London market had
become the largest center of world aviation insurance.
Virtually every significant aircraft manufacturer or air
carrier anywhere in the world had some portion of its
insurance cover placed in the London market.

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Types of aviation insurance

1. Public liability Insurance

2. Passenger liability insurance
3. Combined Single Limit Insurance
4. Ground risk hull insurance
5. General hull insurance

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1. Public Liability Insurance

This coverage often referred to as third party
liability which covers aircraft owners for damage
that their aircraft does to third party property
such as houses, cars, crops, airport facilities and
other aircraft in a collision.
It does not provide coverage for damage to the
insured aircraft itself or coverage for passengers
injured on the insured aircraft.
After an accident insurer will compensate the
third parties victims for their losses.
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International Law
The liability of an aircraft owner or operator for injury or
damage caused to persons and property on the surface
or in other words to third parties on the surface was first
raised at the Rome Convention 1933.
The Rome Convention of 1933 applies to both foreign
and national aircraft. It provides for the prima facie
liability of the aircraft operator, which liability is limited to
250 gold francs (about 20 USD) per kg weight of the
aircraft.
It requires every aircraft to be insured or guaranteed
against such liability.
1952 another Rome Convention was formed which is
applicable to foreign aircraft only
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Brussels Insurance Protocol 1938

This was an additional protocol to Rome
Convention of 1933
Defense over unlawful interference was
introduced

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Illustration (McAndrews aviation v.

Bamaco Airport)
The aircraft was in its way to Monrovia for
landing. Due to unexpected civil disorder
erupted in Liberia, it had to immediately divert to
Bamako whereby it crash landed and damaged
several items belonging to the airport. There
were no fatalities. The insurer was trying to rely
on war and civil disorder defense.
It was ruled that the civil disorder was not the
causa proxima of the accident as it takes about
45 minutes or so to reach Bamako and the flight
was already stable in the air. The causa proxima
was pilot error during landing.
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Amendment
In March 2010, the modernization of Rome
Convention 1952 has produced two draft
conventions; namely the Convention on
Compensation for Damage Caused by Aircraft to
Third Parties, in the case of unlawful
interference (known as the Unlawful Interference
Convention), and the Convention on
Compensation for Damage Caused by Aircraft to
Third Parties (known as the General Risks
Convention).
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Unlawful interference Convention

This convention applies to damage to third
parties which occurs in the territory of a State
party caused by an aircraft in flight as a result of
an act of unlawful interference when the
operator is based in another State, whether or
not a party to the convention (article 2, para 1).
The convention also applies, in certain
circumstances, to damage to third parties in a
non-State party where the operator causing the
damage was from a State party.
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Unlawful Interference Convention

The convention provides that the
operator is strictly liable for the damage
sustained by the third party caused by an
aircraft in flight;
The airlines liability is capped according
to the weight of the aircraft SDR 700
millions (about One billion USD) for a
wide-bodied aircraft.
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Unlawful Interference Convention

Damages in excess of the cap would be
paid through the Supplementary
Compensation Mechanism (article 4)
funded by mandatory payments by
passengers and freight forwarders (article
12) collected by airlines and rendered to
the scheme.
The time limit to settle the claims is three
years
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General Risk Convention

This convention applies to damage to
third parties occurring in the territory of a
State party caused by an aircraft in flight,
other than as a result of an act of unlawful
interference, when the operator is based
in another State party.

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General Risk Convention

The operator is strictly liable from SDR 250,000
to SDR 500,000 per claimant (about 270,000
USD to 600,000 USD (article 3). The operator is
also liable for all damage in excess of this limit
unless it can prove that such damage was not
due to its negligence or that it was solely due to
the negligence of another party.
The time limit to settle claims is three years

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Status
Both Unlawful Interference and General
Risks Conventions are yet to be ratified.
Approval of the ICAO legal committee is
still underway.

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2. Passenger Liability Insurance

Passenger liability protects passengers
traveling on board of the aircraft against
accidents which might cause bodily
injuries or death or damage to their
baggage and cargo.
The coverage is often sold on a per-seat
basis with a specified limit for each
passenger.
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International Law
The Warsaw Convention of 1929
The Montreal Convention of 1999

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Combined Single Limit (CSL)

CSL coverage combines public and passenger
liability coverage into a single coverage with a
single overall limit per accident.
This type of coverage provides more flexibility in
paying claims for liability, especially if
passengers are injured and damage to third
parties had been also caused on the ground.
Most airlines usually go for CSL

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Ground Hull insurance

This provides coverage for the insured aircraft
against damage when it is on the ground.
Ground hull insurance not in motion will cover
events such as fire, theft, vandalism, flood,
mudslides, animal damage, snow, hangar
collapse, vehicles etc.
Ground hull risk in motion (taxiing) covers events
when the aircraft is taxiing on the taxiways.

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In-flight insurance
In-flight coverage protects an insured
aircraft against damage during all phases
of flight form taking off to landing.
It is the more expensive than non-inmotion coverage since most aircraft are
damaged while in flight.

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 Motor vehicle insurance

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Definition
Motor vehicle insurance also known as
auto insurance is a contract of insurance
by which one party known as insurer
assumes the risk of any loss or liability the
owner or operator of a vehicle may incur
through damage to property or to persons
as a result of an accident.

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Common carrier obligations

As a matter of principle, common carriers
are liable for the loss or damage that the
may cause to goods or passengers in the
carriage by road.
It is a requirements under the law in many
jurisdiction to have adequate insurance
that will cover them against loss or liability.

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Types of Covers

Liability Insurance
Property liability Insurance
Combined Single Limit (comprehensive)
Goods In Transit (GIT)

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Liability
Liability insurance covers the insured with
the damage to third party on properties,
injuries or death resulting from accidents
which the insured is judged legally liable.
The liability insurance covers the
passengers on board of the vehicle as
well.
It does not cover the vehicle of the
insured.
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International Law
The question of liability in international carriage
of goods by road was introduced way back in
1956.
The convention on the Contract for the
International Carriage of goods by Road (CMR)
was signed in Geneva, 19th May 1956.
The objectives of CMR convention was to
provide for common contract of carriage,
common consignment note and harmonized
liability regime.
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Liability under CMR

The carrier is liable for the loss, damage
and delay of the goods occurring between
the time when he takes over the goods
and the time of delivery.
The burden of proof under the CMR is a
reversed burden of proof or in other words
is rested upon the carrier.

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Exemption under CMR

The use of open unsheeted vehicles was
agreed and specified in the consignment
note
Defective packaging
Poor handling, loading, stowage and
unloading of the goods by the sender
Loss or damage was caused by the
claimant
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Illustration (Roland Pierce v. Truck

Europe)
The consignment was the carriage of cucumbers
from Stuttgart to Oostend by truck. The
cucumbers were packed in a metal sheet
container category 8. The cucumbers arrived in
Oostend in bad condition and unfit for human
consumption. Roland Pierce sued Truck Europe
for the loss under CMR
It was ruled that the loss was due to defective
package by the sender. Cucumbers requires
metal sheets containers category 12.
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Principle of Absolute liability

The principle under CMR is that the carrier
is absolutely liable for any loss or damage
to the goods including damages resulting
from delays of delivery.

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Limit of liability
The limit of liability in case of loss or damage of
the goods is 25 franc per kilogram which is
equivalent to USD 2.
In case of damage occasioned by delay the
carrier shall pay compensation for such damage
not exceeding the carriage charges.
Sender may against payment of a surcharge,
declare in the consignment note a value for the
goods exceeding the limit.
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Geneva Protocol 1978

It is a protocol additional to CMR
convention.
Introduced SDR
The limit of liability increased to 8.33 SDR
which is equivalent to USD 10 per
kilogram.

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Geneva Protocol 2008

Signed on 30th may 2008 as an additional
protocol to CMR convention.
Expected to come into force by June 2011.
Introduced electronic consignment note.

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When goods are presumed lost?

If the goods are not delivered within thirty
days after the agreed time limit, or if there
is no agreed time limit within sixty days
from the time when the carrier took over
the goods, it will be conclusively presumed
that the goods are lost.

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Ad-Valorem
This is a valued consignment note. The
sender of the goods may against payment
of surcharge to be agreed upon, declare in
the consignment note a value for the
goods exceeding the limit laid down in the
convention.
In this case the amount of the declared
value shall be substituted for that limit.
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Willful Misconduct
The carrier shall not enjoy the limit under
CMR convention if it will be proved there
was a willful misconduct on the side of the
carrier.

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Liability under National Laws

In many jurisdiction, it is mandatory to insure
against third party liability for all types of motor
vehicles.
In all common law countries, it is an offence
punishable by law to operate motor vehicles
without insurance. Third party risk is the
minimum insurance category provide under the
law.
In Tanzania section 4 of motor vehicles
Insurance Act, Cap 169 R.E 2002) impose a
requirement for motor vehicles to be insured
against third party risk
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Types of third party risk

Third party (act liability only) it is a minimum cover
required by law. It provides cover against legal liabilities
in respect of death or bodily injury to third parties arising
out of the use of the motor vehicle on the road.
2. Third party cover provides similar cover like act liability
only, but in addition it extends to cover legal liability in
respect of damage to properties of third parties.
3. Third party fire and theft on top of the cover provided
by third party cover, it provides for the risk of loss or
damage to the insured vehicles as result of fire and or
theft.

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Illustration (Ramadhani Mpiluka v.

Heritage Insurance)
Ramadhani Mpiluka insured his vehicle with third
party risk. After seven months he got an accident
and caused damages to a shop belong to one
Rita Mkaudya along Nyerere road. Mpiluka
approached his insurer so that Mkaudya is
indemnified. Heritage insurance refused to
indemnify as Mpilukas cover was third party (act
liabilities only) which do not cover third party
properties. Mpiluka sued Heritage in the court of
law.
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Held
It was ruled that Mpilukas insurance cover
was not providing for third partys property
and was ordered to indemnify Mkaudya
from his own pocket.

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Property Liability Insurance

Property liability coverage provide for the
protection of the insured against loss or
damage to his or her own vehicle.
The coverage covers accidents, fire and
theft. It does not cover damages of the
properties of the third parties.
It does not cover death or bodily injuries to
third parties nor to the insured.
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CSL (Comprehensive)
This is a wider cover, which provides
protection against loss or damage to the
insured vehicle and its accessories whilst
attached thereon, fire, theft, third party
liabilities, authorized driver and towing
charges.
In other words it combines all third party
liability risks with property liability.
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Goods In Transit (GIT)

This is the insurance coverage for the
motor vehicles which carry goods from
one destination to another. It covers the
carriers liability against damage or loss of
the goods carried on board.
Its premium is usually calculated in terms
of tonnage of the vehicle or types of the
goods to be carried.
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Carriers Insurable Interest

A carrier who is in possession of the goods of
another person as a bailee has an insurable
interest in those goods because he or she is
under an obligation to return the goods to the
person entitled to them and is liable for any loss
of or damage to the goods.
Carrier is entitled to insure them for his own
interest as well as for that of the owner.

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 Railway Insurance

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Railway Insurance
Railway insurance market is fairly new and
very unpopular market in the transport
insurance sector.
It is a contract of insurance by which one
party known as insurer assumes the risk
of any loss or liability the railway
administrator or operator may incur
through damage to property or persons as
a result of an accident.
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Types of Railway Insurance

Railway Liability Insurance

Railway Property Liability Insurance
Railway Goods In Transit cover (GIT)
Railway Combined Single Limit Insurance
Railroad Protective Liability Insurance

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Railway Liability Insurance

This is the insurance which covers the
insured against third party damages. In
many jurisdiction this a compulsory or
statutory cover provided under Railways
Laws.
All damages to third parties are covered
under this type of insurance.

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International Law
The unification of rules and standards in
international carriage of passengers and goods
had not been very successfully compared to
other modes of transport.
The only existing unification arrangements was
made through Convention Concerning
International Carriage by Rail (COTIF) of 1980
Objective was to develop a system of law which
apply to the carriage of passengers and goods
by rail.
To have common liability regime and common
standard of contracts.
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Railway Liability Insurance

Under the Convention Concerning International Carriage
by Rail (COTIF) of 1980 appendix A which is about
carriage of passengers by rail (CIV) the carrier is liable
for loss or damage to passengers and their luggage in
the carriage by rail.
CIV refers to a set of uniform rules shared by European
railway operators in the carriage of passengers and their
luggage.
The Convention forms Inter governmental Organization
to be an enforcer of the Convention (OTIF)
The headquarter of OTIF is in Berne, Switzerland.
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Property Liability
This is the coverage which covers the
insured against damages to rolling stocks,
machines, engines and all train
equipments.
In occurrence of damages the
underwriters will indemnify the insured.

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Railway Goods In Transit

Railway goods in transit (GTI) insurance
covers risks against damages to goods or
cargo carried on board.

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Borisovich vs Ukraine Locomotives

Ukraine Locomotives contracted to carry
cattle's from Kharkov to Donetski. They
were insured against GIT. They did not
disinfect the wagons after the previous
trip. In the course of transportation cattle's
were infected with foot and mouth
disease. Borisovich sued Ukraine
Locomotives for the loss.
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Held:
Ukraine Locomotives were held liable. The
infection was caused by uncargoworthines
of the wagons and the loss could have
been mitigated if the disinfection was done
at the beginning. The mitigation of loss
principle was violated.

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GIT
Under the Convention Concerning International
Carriage by Rail (COTIF) of 1980 appendix B
which is about carriage of goods by rail (CIM),
the carrier is liable for loss or damage to goods
or cargo.
CIM refers to a set of uniform rules shared by
European railway operators in the carriage of
goods and cargo. Standardization of contract of
carriage of goods and cargo by rail.
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COTIF Members
At present there are 45 member States in
Europe, North Africa and Near East.

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COTIF members
Albania, Algeria, Austria, Belgium, Bosnia and
Herzegovina, Bulgaria, Croatia, Czech Republic,
Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Iran, Iraq, Ireland, Italy, Latvia,
Lebanon. Liechtenstein, Lithuania, Luxembourg,
the Former Yugoslav Republic of Macedonia,
Monaco, Montenegro, Morocco, Netherlands,
Norway, Poland, Portugal, Romania, Russia,
Serbia, Slovak Republic, Slovenia, Spain,
Sweden, Switzerland, Syria, Tunisia, Turkey,
Ukraine and United Kingdom.
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CSL
Railways Combined Single Limit insurance
this is a comprehensive insurance which
covers the insured against property, fire,
theft, third party liability and goods carried
on board.
It combines liability insurance with
property and goods in transit liability.

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Railroad Protective Liability

Insurance (RRP)
The RRP protects the railway administrator form
liability associated with specific work in the
development of railroads and infrastructure.
The RRP policy does not provide coverage for
any liability that is not connected with work at the
job that is being performed. Contractors and
subcontractors are not covered.
RRP does not cover rolling stocks.

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National Laws
Many jurisdiction do not have special provision
for railway insurance in their railways laws. Most
of the liability issues in railways transportation
are being dealt under normal law of tort.
Unification of liability in this sector has not been
achieved with the exceptional of COTIF
countries.
In Africa it is only Algeria, Morocco and Tunisia
who are members to COTIF.
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 Marine Insurance

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Definition
Marine Insurance is a contract of
insurance whereby one party known as
insurer undertakes to indemnify another
party known as insured against loss or
damage to property, death or personal
injuries and other marine risks.
It is one of the earliest well developed
insurance in transportation sector.
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Main Types of Marine Insurance

Marine liability insurance

Marine hull insurance
Marine cargo insurance

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Marine liability insurance

Marine General Liability Insurance it
covers risks associated with bodily injuries
or death to passengers on board of the
ship from various marine accident.
Marine third party liability insurance it
covers damage to properties and bodily
injuries or death to third parties from
collision or any other marine accident.
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International Law
The issue of marine general liability insurance is
regulated under Athens Convention relating to
the Carriage of Passengers and their Luggage
by Sea, 1974.
The convention was signed on 13th December
1974, in Athens, Greece. The Convention
entered into force on 28th April 1987.
was designed to consolidate and harmonize two
earlier Brussels conventions dealing with
passengers and luggage and adopted in 1961
and 1967 respectively.
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International Law
The issue of marine general liability insurance is
regulated under Athens Convention relating to
the Carriage of Passengers and their Luggage
by Sea, 1974.
The convention was signed on 13th December
1974, in Athens, Greece. The Convention
entered into force on 28th April 1987.
was designed to consolidate and harmonize two
earlier Brussels conventions dealing with
passengers and luggage and adopted in 1961
and 1967 respectively.
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Burden of Proof
The burden of proving that the incident
which caused the loss or damage
occurred in the course of the carriage, and
the extent of the loss or damage, shall lie
with the claimant.
Under this convention the claimant has to
prove negligence of the carrier as it is the
case in any tort claim.
The carrier do not have a strict liability.
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Athens Convention 1974

The Convention establishes a regime of
liability for damage suffered by
passengers carried on a seagoing vessel.
It declares a carrier is liable for damage or
loss suffered by a passenger and the loss
of or damage to luggage if the incident
causing the damage occurred in the
course of the carriage and was due to the
fault or neglect of the carrier.
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Exoneration
If the carrier proves that the death of or
personal injury to a passenger or the loss
of or damage to his luggage was caused
or contributed to by the fault or neglect of
the passenger, the court seized of the
case may exonerate the carrier wholly or
partly from his liability.

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Limit of liability
The liability of the carrier for the death of
or personal injury to a passenger shall in
no case exceed 700,000 francs per
carriage (about USD 50,000)
The liability of the carrier for the loss of or
damage to cabin luggage shall in no case
exceed 12,500 francs per passenger, per
carriage (about USD 1000).
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Limit of liability
The liability of the carrier for the loss of or
damage to vehicles including all luggage
carried in or on the vehicle shall in no case
exceed 50,000 francs per vehicle, per
carriage (about USD 5000).

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Additional Protocol 1976

The 1976 Protocol made the unit of
account the Special Drawing Right (SDR),
replacing the "Poincar franc", based on
the "official" value of gold, as the
applicable unit of account.

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Protocol of 1990
The limit of liability was increased to
175,000 Special Drawing Rights, about
200,000 USD per carriage.

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Additional Protocol 2002

The Protocol introduces compulsory
insurance to cover passengers on ships
and raises the limits of liability.
Strict liability introduced
Reverse burden of proof
The limit of liability under new protocol is
limited to 250,000 SDR (about USD
270,000) per passenger on each distinct
occassion.
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Additional Protocol 2002

If the amount of damage or loss for death
or personal injuries exceeds 250,000
SDR, the claimant can exceed the limit up
to 400,000 SDR (about USD 480,000) per
passenger.
On this occasion the burden of proof will
be on the claimant.

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Additional Protocol 2002

Loss of or damage to luggage and vehicles
The liability of the carrier for the loss of or
damage to cabin luggage is limited to 2,250 SDR
per passenger, per carriage (about USD 2500).
liability of the carrier for the loss of or damage to
vehicles including all luggage carried in or on the
vehicle is limited to12,700 SDR per vehicle, per
carriage (about USD 16000).
liability of the carrier for the loss of or damage to
other luggage is limited to 3,375 SDR per
passenger, per carriage (about USD 3600).
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Additional Protocol 2002

The protocol changes the name of the
convention to now be called the Athens
Convention relating to the Carriage of
Passengers and their Luggage by Sea,
2002.
The protocol shall enter into force 12
months after the 10th States ratifies the
convention.
It is still not in force yet.
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Marine Hull Insurance

Marine Hull Insurance covers loss or
damage to hull and machinery. The hull is
the structure of the vessel. Machinery is
the equipment that generates the power to
move the vessel and control the lighting
and temperature system such as boiler,
engine, cooler and electricity generator.

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Institute Time Clauses

These are the main clauses and most important
in Marine Hull policies. Time Clauses covers for
a specific period usually 12 months. As the
nature and degree of risks which the Insurer run
vary according to the kind of vessel, there exist a
number of categories in the Time Clauses. They
are : Institute Time Clauses (Hull)
Institute Time Clauses (Free of Particular
Average)
Institute Time Clauses (Total Loss Only)
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Institute Time Clause (hull)

Provides the maximum coverage offered
by hull insurance.

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Institute Time Clause (FPA)

The coverage of these clauses are similar to that
of Hulls Clauses but exclude coverage on
machinery damages in all respects.
It is advised that all vessels which exceed 15
years of age or older, if the risk accepted, to give
this coverage only. Past experience shows that
older vessels suffer serious casualties due to
machinery damage.

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Institute Time Clause (Total loss

only)
As the name suggested, this clause only
covers in the event of it becoming a total
loss. Usually this cover is only extended to
old vessel (but not more than 20 years).

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Marine Cargo Insurance

This type of insurance protects the insured
against risks and liability to cargo or goods
carried on board of the marine vessels.
Under the contract of affreightment, the
insured may insure against damages to
cargo or goods carried on board of the
ship during the voyage.
Marine cargo insurance is the major
subject of the contract of affreightment.
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Two type
Marine cargo full coverage
Marine cargo damage by sea water
(see Hamiltion vs Pandrof)

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Hamiltion vs Pandrof
In a marine policy, the goods were insured
against damage to goods by sea water.
Some rats on board bored a hole in a zine
pipe in the bath which caused sea water to
pour out and damaged rice loaded inside.
The underwriters contented that as they
had not insured against damage by rats,
they were not bound to pay.
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Held:
It was held that the causa proxima of the
goods was sea water and insured was
entitled to compensation. The rats was
ruled as a remote cause.

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International Laws
The question of carriers liability to goods
was fixed during International
Convention for Unification of Certain
Rules of Law relating to Bills of Lading
("Hague Rules") (Brussels, 25 August
1924)
Hague Visby Rules 1968.
Hamburg Rules 1978
Rotterdam Rules 2009
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