Article by Raymond P. Hayden and Sanford E. Balick
The men who frequented Edward Lloyd's coffee house would doubtless be astounded to learn that the sentences they scratched out, amidst gulps of coffee and the reports of breathless dock runners, have lived on to this very day. This modest coffee shop has long since evolved into a sleek new age structure, yet the quaint insurance phrases, usages, and circumlocutions endure like Gibraltar itself. These forerunners of the modern insurance business would probably be equally amazed at the lengths insureds and their attorneys will go to derive meaning and succor from phrases roughed out before lawyers became an indispensable, if, in the eyes of some, a pestilential fact of daily commerce.
Though some of the language remains arcane, the marine insurance industry has evolved and has itself become an elaborate and sophisticated business struggling to come to grips with the large risks inherent in modern maritime commerce. The enormous potential exposure of the energy business coupled with other relatively recent developments, such as intermodal transport, have forced the marine insurance industry to evolve quickly to meet the needs of global commerce.
In Edward Lloyd's day, marine insurance was the essence of simplicity; one insured either cargo or the hull of the vessel carrying it. Hull insurance gave birth to protection and indemnity insurance which in turn developed further, reflecting the evolution of business liabilities as ships grew in tonnage and progressed from sail to steam. Not only did the need for more specialized coverages develop but the financial demands of these innovations forced the market to engineer ways in which to distribute vast exposures throughout an international network of underwriters. Thus, the excess and reinsurance markets blossomed.
The title of this paper, “Varieties, Combinations, and Coverages,” embraces virtually every significant development in marine insurance that has marked its evolution into the sophisticated industry that it is today. To aid those who must transit these sometimes difficult waters, this Article has been prepared with three primary objectives in mind. The first is to serve as a primer, informing the reader of the basic types of marine insurance coverages and explaning the more salient features of each.
One coverage that is a relatively new source of indemnity to the maritime industry is the comprehensive general liability (CGL) policy. The second objective of this Article is to illuminate the significance of the CGL policy to the marine insurance business as defined by its experience in our courts.
A sophisticated insured's insurance portfolio will include a broad array of coverages designed to accommodate most foreseeable business risks. Modern coverages disputes frequently spill beyond the confines of a single policy and involve difficult considerations posed by multilayered excess and umbrella coverages and other diverse considerations. This Article seeks, as its third goal, to examine these multilayered disputes. The purpose is to provide basic guidance for those whose professional interests bring them into contact with these daunting issues.
It is probably safe to say that no two marine policies are precisely the same. Even with the extensive use of form policies there are the inevitable variations, sometimes small, sometimes substantial, negotiated by the parties. The fact patterns surrounding claims inevitably vary. The decisions of our courts are refracted through these differences and the skill with which the issues are presented. In light of these inherent differences and of the normal vicissitudes of any case, there is simply no substitute for a thorough review of the particular insurance contract in dispute and the manner of its negotiation and placement.
The boundless creativity of counsel, the strong desire of underwriters to avoid eleemosynary status, and the considerable potential exposure presented by new toxic torts and other major pollution events guarantee a near perpetual source of marine insurance litigation. This Article will provide all parties to these disputes with a grasp of concepts and issues necessary to deal with the complex nature of the industry.
About the Author
Raymond P. Hayden. Partner, Hill, Rivkins, Loesberg, O'Brien, Mulroy & Hayden. Member of the New York State Bar. B.S., State University of New York Maritime College; J.D., Syracuse Law School.
Sanford E. Balick. Partner, Hill, Rivkins, Loesberg, O'Brien, Mulroy & Hayden. Member of the New York and Pennsylvania State Bars. B.B.A., Temple University; J.D., Temple University; LL.M., Tulane Law School.
Citation
66 Tul. L. Rev. 311 (1991)