WHAT IS Valued Marine Policy
A valued marine policy is a type of marine insurance coverage that places a specific value on the insured property, such as the hull or cargo of a shipping vessel, prior to the event of a loss. In the absence of fraud, a valued marine policy will pay the specified value if a loss occurs. It differs from an unvalued, or open, marine policy, in which the value of the property would need to be proven subsequent to a loss through the production of invoices, estimates and other evidence.
BREAKING DOWN Valued Marine Policy
A valued marine policy’s monetary value is pre-determined and stated in the policy document, therefore making clear any questions about the value of the reimbursements in case of a total or partial loss to the ships, cargo and terminals covered under the policy. This serves to avoid disputes as to the value of the insured property, and there is generally no reassessment or revaluation necessary if an insured event or loss were to occur. Such policies are distinguished in a policy by the words valued at or so valued.
A valued marine policy pays a fixed amount, regardless of the extent of the damages. For example, a policy may pay $1,000 per box of lost cargo, regardless of whether the value of the cargo is actually $500 or $2,000 per box. It is important to note that if the insured item depreciates in value, it will not affect the amount which can be claimed in the event of a total loss. The same is also true if the value of the item appreciates, in which case the insured would be unable to receive any additional damages based on the increased value of the item.
Valued Marine Policies and the Marine Insurance Act of 1906
The distinction between valued and unvalued policies was first stated in the United Kingdom’s Marine Insurance Act of 1906, which has become the basis for maritime insurance policies and laws in most countries, including the United States. Because the Act states that: for an unvalued policy, the measure of indemnity is the insurable value of the subject matter insured, ship owners with valued policies may fare better if they make a claim during periods of falling market rates. In such scenarios, those with unvalued policies may find that any recovery they will be only a fraction of what the ship was worth at the time when they took out the policy. This makes it extremely important for those insuring ships to obtain policies with the proper wording, especially since the distinction between valued and unvalued marine policies has become the subject of legal disputes in many countries.