Hull and Machinery Insurance: Policy Structure, Clauses and Warranties
This domain tests the structure of hull and machinery (H&M) cover: insured value, perils, exclusions, warranties, deductibles, collision liability, sue and labour and total-loss provisions. The exam expects familiarity with common Institute hull wordings and the logic of partial versus total loss.
Core rules
- H&M covers the vessel, machinery and equipment, and may include disbursements or increased value. The insured value is agreed; it is not automatically the market value.
- Common perils include perils of the seas, fire, explosion, collision, piracy, negligence of master or crew and barratry. Wear and tear, ordinary leakage, inherent vice, delay and insolvency are typically excluded.
- Warranties commonly require maintained class, seaworthiness, trading limits, ISM compliance and navigation limits. Breach can discharge liability.
- Partial loss is paid as repair cost, subject to deductible and policy limits. Total loss may be actual or constructive; abandonment and notice rules apply.
- Sue and labour costs are incurred to avert or minimise loss and are treated separately, subject to the wording.
Worked example
A hull insured for ₹8 crore suffers collision damage. The approved repair estimate is ₹1.15 crore, including ₹15 lakh for owner's optional upgrades. The policy deductible is ₹5 lakh. The surveyor allows ₹1 crore as insured damage, deducts ₹5 lakh, and recommends ₹95 lakh, subject to the insured value and any collision recovery. The upgrades are not recoverable because they improve the vessel beyond its pre-loss condition.
Traps
Do not treat the insured value as a guaranteed market price. Do not ignore the deductible or policy limit. Do not allow wear-and-tear items as collision damage. Do not assume a 3/4 collision clause is 4/4. Do not pay a CTL without checking wreck value and notices.