HB2947

SECTION 1. Chapter 431, Hawaii Revised Statutes, is amended by adding a new article to be appropriately designated and to read as follows:

"ARTICLE

MARINE INSURANCE CONTRACTS

PART I. MARINE INSURANCE

§431: -1 Marine insurance defined. A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure.

§431: -2 Mixed sea and land risks. (a) A contract of marine insurance, by its express terms, or by usage of trade, may be extended to protect the insured against losses on inland waters or on any land risk that may be incidental to any sea voyage.

(b) Where a ship in course of building, or the launch of a ship, or any adventure analogous to a marine adventure, is covered by an insurance policy in the form of a marine insurance policy, the provisions of this article, in so far as applicable, shall apply thereto, but, except as by this section provided, nothing in this article shall alter or affect any rule of law applicable to any contract of insurance other than a contract of marine insurance as by this article defined.

§431: -3 Marine adventure and maritime perils defined. (a) Subject to this article, every lawful marine adventure may be the subject of a contract of marine insurance.

(b) There shall be a marine adventure where:

(1) Any ship goods or other moveables are exposed to maritime perils. Such property is in this article referred to as "insurable property";

(2) The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils; or

(3) Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils. For the purposes of this section, "maritime perils" means the perils consequent on, or incidental to, the navigation of the sea, including perils of the seas, fire, war, perils, pirates, rovers, thieves, captures, seizures, restraints, and detainment's of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or that may be designated by the policy.

PART II. INSURABLE INSURANCE

§431: -11 Avoidance of wagering or gaming contracts. (a) Every contract of marine insurance by way of gaming or wagering is void.

(b) A contract of marine insurance is deemed to be a gaming or wagering contract if:

(1) The insured has no insurable interest as defined by this article, and the contract is entered into with no expectation of acquiring such an interest; or

(2) The policy is made "interest or no interest", "without further proof of interest than the policy itself", "without benefit of salvage to the insurer", or subject to any other like term;

provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer.

§431: -12 Insurable interest defined. (a) Subject to the provisions of this article, every person has an insurable interest who is interested in a marine adventure.

(b) A person is interested in a marine adventure where the person stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which the person may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.

§431: -13 When interest must attaches. (a) The insured shall be interested in the subject-matter insured at the time of the loss, though the insured need not be interested when the insurance is effected; provided that where the subject matter is insured "lost or not lost", the insured may recover although the insured may not have acquired an interest until after the loss, unless at the time of effecting the contract of insurance the insured was aware of the loss, and the insurer was not.

(b) Where the insured has no interest at the time of the loss, the insured shall not acquire interest by any act or election after the insured is aware of the loss.

§431: -14 Defeasible or contingent interest. (a) A defeasible interest is insurable, as also is a contingent interest.

(b) Where the buyer of goods has insured the goods, the buyer has an insurable interest, notwithstanding that the buyer, at the buyer's election, might have rejected the goods, or have treated them as at the seller's risk, by reason of the latter's delay in making delivery or otherwise.

§431: -15 Partial interest. A partial interest of any nature is insurable.

§431: -16 Re-insurance. (a) The insurer under a contract of marine insurance shall have an insurable interest in the risk, and may re-insure in respect of it.

(b) Unless the policy otherwise provides, the original insured shall have no right or interest in respect of such re-insurance.

§431: -17 Bottomry. The lender of money on bottomry or respondentia has an insurable interest in respect of the loan.

§431: -18 Master's and seamen's wages. The master or any member of the crew of a ship shall have an insurable interest in respect of one's wages.

§431: -19 Advance freight. In the case of advance freight, the person advancing the freight shall have an insurable interest, in so far as such freight is not repayable in case of loss.

§431: -20 Charges of insurance. The insured shall have an insurable interest in the charges of any insurance which the insured may effect.

§431: -21 Quantum of interest. (a) Where the subject matter insured is mortgaged, the mortgagor shall have an insurable interest in the full value thereof, and the mortgagee shall have an insurable interest in respect of any sum due or to become due under the mortgage.

(b) A mortgagee, consignee, or other person having an interest in the subject-matter insured may insure on behalf and for the benefit of other persons interested as well as for one's own benefit.

(c) The owner of insurable property shall have an insurable interest in respect of the full value thereof, notwithstanding that some third person may have agreed, or be liable, to indemnify the owner in case of loss.

§431: -22 Assignment of interest. Where the insured assigns or otherwise parts with his interest in the subject-matter insured, the insured shall not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect. This section does not affect a transmission of interest by operation of law.

§431: -23 Measure of insurable value. Subject to any express provision or valuation in the policy, the insurable value of the subject-matter insured shall be ascertained as follows:

(1) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen's wages, and other disbursements, if any, incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole. The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores if owned by the insured, and, in the case of a ship engaged in a special trade, the ordinary fittings requisite for that trade;

(2) In insurance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the freight at the risk of the insured, plus the charges of insurance;

(3) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole; and

(4) In insurance on any other subject matter, the insurable value is the amount at the risk of the insured when the policy attaches, plus the charges of insurance.

PART III. DISCLOSURE AND REPRESENTATIONS

§431: -31 Disclosure by insured. (a) Before the contract is concluded, the insured shall truthfully inform the insurer of the material circumstances that the insured has knowledge of or ought to have knowledge of in the insured's ordinary business practice and that may have a bearing on the insurer in deciding the premium or whether the insurer agrees to insure or not.

(b) The insured is not required to inform the insurer of the facts that the insurer has known of or the insurer ought to have knowledge of in the insurer's ordinary business practice if about which the insurer made no inquiry.

§431: -32 Right to terminate. (a) Upon failure of the insured to truthfully inform the insurer of the material circumstances set forth in section 431: -31(a) due to the insured's intentional act, the insurer shall have the right to terminate the contract without refunding the premium. The insurer shall not be liable for any loss arising from the perils insured against before the contract is terminated.

(b) If, not due to the insured's intentional act, the insured failed to truthfully inform the insurer of the material circumstances set out in section 431: -31(a), the insurer shall have the right to terminate the contract or to demand a corresponding increase in the premium. If a contract is terminated by the insurer, the insurer shall be liable for the loss arising from the perils insured against that occurred prior to the termination of the contract, except where the material circumstances uninformed or wrongly informed of have an impact on the occurrence of such perils.

§431: -33 Disclosure by agent effecting insurance. Subject to section 431: -31(b) as to circumstances not required to be disclosed, where insurance is effected for the insured by an agent, the agent shall disclose to the insurer as follows:

(1) Every material circumstance known to the agent, and an agent to insure is deemed to know every circumstance, which in the ordinary course of business, ought to be known by, or to have been communicated to, the agent; and

(2) Every material circumstance that the insured is required to disclose, unless it comes to the insured's knowledge too late to communicate it to the agent.

§431: -34 Representations pending negotiation of contract. (a) Every material representation made by the insured or the insured's agent to the insurer during the negotiations for the contract, and before the contract is concluded, are required to be true. If any material representation is untrue, the insurer may avoid the contract.

(b) A representation is material if it would influence the judgment of a prudent insurer in fixing the premium, or determining whether the prudent insurer will take the risk.

(d) A representation as to a matter of fact is true, if it be substantially correct, that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.

(e) A representation as to a matter of expectation or belief is true if it is made in good faith.

(f) A representation may be withdrawn or corrected before the contract is concluded.

(g) Whether a particular representation is material or not is, in each case, is a question of fact.

§431: -35 When contract shall be deemed to be concluded. A contract of marine insurance shall be deemed to be concluded when the proposal of the insured is accepted by the insurer, whether the policy be then issued or not. For the purpose of showing when the proposal was accepted, reference may be made to the slip or covering note or other customary memorandum of the contract.

PART IV. THE POLICY

§431: -41 Contract must be embodied in policy. Unless otherwise specified, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this article. The policy may be executed and issued either at the time when the contract is concluded, or afterwards.

§431: -42 What policy must specify. A marine policy shall specify the name of the insured, or of some person who effects the insurance on the insured's behalf.

§431: -43 Signature of insurer. (a) A marine policy shall be signed by or on behalf of the insurer, provided that in the case of a corporation, the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal.

(b) Where a policy is subscribed by or on behalf of two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the insured.

§431: -44 Voyage and time policies. Where the contract is to insure the subject matter "at and from," or from one place to another or other, the policy is called a "voyage policy", and where the contract is to insure the subject matter for a definite period of time, the policy is called a "time policy". A contract for both voyage and time may be included in the same policy.

§431: -45 Designation of subject-matter. (a) The subject-matter insured shall be designated in a marine policy with reasonable certainty.

(b) The nature and extent of the interest of the insured in the subject matter insured is not required to be specified in the policy.

(c) Where the policy designates the subject matter insured in general terms, it shall be construed to apply to the interest intended by the insured to be covered.

(d) In the application of this section, regard shall be had to any usage regulating the designation of the subject matter insured.

§431: -46 Valued policy. (a) A policy may be either valued or unvalued.

(b) A valued policy is a policy that specifies the agreed value of the subject matter insured.

(c) In the absence of fraud, the value fixed by the policy, as between the insurer and insured, shall be conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial.

(d) Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss.

§431: -47 Unvalued policy. An unvalued policy is a policy that does not specify the value of the subject matter insured, but subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner previously specified.

§431: -48 Floating policy by ship or ships. (a) A floating policy is a policy that describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration.

(b) The subsequent declaration or declarations may be made by endorsement on the policy, or in other customary manner.

(c) Unless the policy otherwise provides, the declarations shall be made in the order of dispatch or shipment. In the case of goods, the declarations shall comprise all consignments within the terms of the policy, and the value of the goods or other property shall be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.

(d) Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy shall be treated as an unvalued policy as regards the subject matter of that declaration.

§431: -49 Construction of terms in policy. (a) A policy may be in the form in the first schedule to this article.

(b) Unless the context of the policy otherwise requires, the terms and expressions mentioned in the first schedule to this article shall be construed as having the scope and meaning in that schedule assigned to them.

§431: -50 Premium to be arranged. (a) Where an insurance is effected at a premium to be arranged, and no arrangement is made, a reasonable premium shall be payable.

(b) Where an insurance is effected on the terms that an additional premium is to be arranged in a given event, and that event happens but no arrangement is made, then a reasonable additional premium shall be payable.

PART V. DOUBLE INSURANCE

§431: -51 Double insurance. (a) Where two or more policies are effected by or on behalf of the insured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this article, the insured is said to be over-insured by double insurance.

(b) Where the insured is over-insured by double insurance:

(1) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as the insured may think fit, provided that the insured is not entitled to receive any sum in excess of the indemnity allowed by this article;

(2) Where the policy under which the insured claims is a valued policy, the insured shall give credit as against the valuation for any sum received by the insured under any other policy without regard to the actual value of the subject matter insured;

(3) Where the policy under which the insured claims is an unvalued policy, the insured shall give credit, as against the full insurable value, for any sum received by the insured under any other policy; and

(4) Where the insured receives any sum in excess of the indemnity allowed by this article, the insured is deemed to hold the sum in trust for the insurers, according to their right of contribution among themselves.

PART VI. EXPRESS TERMS

§431: -61 Express terms. (a) Nothing in this article shall prohibit the insured and the insurer from making any relevant subject matter the subject of express terms; provided that no breach of an express term shall relieve the insurer from the insurer's duties under the policy unless the breach is causative of the loss being insured against.

(b) Under no circumstances shall a trivial breach or a breach that is irrelevant to the insured loss excuse the insurer from the insurer's duties under the policy.

(c) The insurer and the insured may provide remedies to be available to the insurer that reflect the degree of prejudice actually suffered by the insurer as a result of the breach.

PART VII. THE VOYAGE

§431: -71 Implied condition as to commencement of risk. (a) Where the subject matter is insured by a voyage policy "at and from" or "from" a particular place, the ship is not required to be at that place when the contract is concluded, but the adventure shall be commenced within a reasonable time; provided that, if the adventure is not commenced within a reasonable time, the insurer may avoid the contract.

(b) The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that the insurer waived the condition.

§431: -72 Alteration of port of departure. Where the place of departure is specified by the policy, and the ship sails from any other place, the risk shall not attach.

§431: -73 Sailing for different destination. Where the destination is specified in the policy, and the ship sails for any other destination, the risk shall not attach.

§431: -74 Change of voyage. (a) Where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage.

(b) Unless the policy otherwise provides, where there is a change of voyage, the insurer shall be discharged from liability as from the time when the determination to change the destination is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs.

§431: -75 Deviation. (a) Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer shall be discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs.

(b) There is a deviation from the voyage contemplated by the policy if:

(1) The course of the voyage is specifically designated by the policy, and that course is departed from; or

(2) The course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from.

(c) The intention to deviate is immaterial. A deviation in fact is required to discharge the insurer from liability under the contract.

§431: -76 Several ports of discharge. (a) Where several ports of discharge are specified by the policy, the ship may proceed to all or any of them, but, in the absence of any usage or sufficient cause to the contrary, the ship shall proceed to them, or such of them as the ship goes to, in the order designated by the policy. If not, there is a deviation.

(b) Where the policy is to "ports of discharge", within a given area, which are not named, the ship must, in the absence of any usage or sufficient cause to the contrary, proceed to them, or such of them as the ship goes to, in their geographical order. If not, there is a deviation.

§431: -77 Voyage policy; reasonable dispatch. In the case of a voyage policy, the adventure insured shall be prosecuted throughout its course with reasonable dispatch. If without lawful excuse, there is no prosecution, the insurer shall be discharged from liability as from the time when the delay became unreasonable.

§431: -78 Voyage policy; lack of reasonable dispatch; lawful excuse. (a) Deviation or delay in prosecuting the voyage contemplated by the policy shall be excused:

(1) Where authorized by any special term in the policy;

(2) Where caused by circumstances beyond the control of the master and the master's employer;

(3) Where reasonably necessary to comply with an express or implied warranty;

(4) Where reasonably necessary for the safety of the ship or subject matter insured;

(5) For the purpose of saving human life, or aiding a ship in distress where human life may be in danger;

(6) Where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or

(7) Where caused by the barratrous conduct of the master or crew, if barratry is one of the perils insured against.

(b) When the cause excusing the deviation or delay ceases to operate, the ship shall resume its course with reasonable dispatch.

PART VIII. ASSIGNMENT OF POLICY

§431: -81 When and how policy is assignable. (a) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.

(b) Where a marine policy has been assigned to pass the beneficial interest in the policy, the assignee of the policy is entitled to sue thereon in the assignee's own name; and the defendant is entitled to make any defense arising out of the contract that the defendant would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

§431: -82 Insured who has no interest cannot assign. Where the insured has parted with or lost the insured's interest in the subject matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy shall be inoperative; provided that nothing in this section affects the assignment of a policy after loss.

PART IX. THE PREMIUM

§431: -91 When premium payable. Unless otherwise agreed, the duty of the insured or the insured's agent to pay the premium, and the duty of the insurer to issue the policy to the insured or the insured's agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium.

§431: -92 Policy effected through broker. (a) Unless otherwise agreed, where a marine policy is effected on behalf of the insured by a broker, the broker shall be directly responsible to the insurer for the premium, and the insurer shall be directly responsible to the insured for the amount that may be payable in respect of losses, or in respect of returnable premium.

(b) Unless otherwise agreed, the broker shall have, as against the insured, a lien upon the policy for the amount of the premium and the broker's charges in respect of effecting the policy; and, where the broker has dealt with the person who employs the broker as a principal, the broker shall have a lien on the policy in respect of any balance on any insurance account that may be due to the broker from the person, unless when the debt was incurred the broker had reason to believe that the person was only an agent.

§431: -93 Effect of receipt on policy. Where a marine policy effected on behalf of the insured by a broker acknowledges the receipt of the premium, that acknowledgement, in the absence of fraud, shall be conclusive as between the insurer and the insured, but not as between the insurer and broker.

PART X. LOSS AND ABANDONMENT

§431: -101 Included and excluded losses. Unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, the insurer is not liable for any loss that is not proximately caused by a peril insured against:

(1) The insurer is not liable for any loss attributable to the wilful misconduct of the insured, but, unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;

(2) Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against; or

(3) Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.

§431: -102 Partial and total loss. (a) A loss may be either total or partial. Any loss other than a total loss shall be a partial loss.

(b) A total loss may be either an actual total loss or a constructive total loss.

(c) Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss.

(d) Where the insured brings an action for a total loss and the evidence proves only a partial loss, the insured, unless the policy otherwise provides, may recover for a partial loss.

(e) Where goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any, is partial, and not total.

§431: -103 Actual total loss. (a) Where the subject matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the insured is irretrievably deprived thereof, there is an actual total loss.

(b) In the case of an actual total loss, notice of abandonment is not required.

§431: -104 Missing ship. Where the ship concerned in the adventure is missing, and after the lapse of a reasonable time no news of the ship has been received, an actual total loss may be presumed.

§431: -105 Effect of transshipment, etc. Where, by a peril insured against, the voyage is interrupted at an intermediate port or place, under such circumstances as, apart from any special stipulation in the contract of affreightment, to justify the master in landing and reshipping the goods or other moveables, or in transshipping them, and sending them on to their destination, the liability of the insurer shall continue, notwithstanding the landing or transshipment.

§431: -106 Constructive total loss defined. (a) Subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.

(b) There is a constructive total loss if:

(1) The insured is deprived of the possession of his ship or goods by a peril insured against, and either:

(A) It is unlikely that the insured can recover the ship or goods, as the case may be; or

(B) The cost of recovering the ship or goods, as the case may be, would exceed their value when recovered;

(2) In the case of damage to a ship, the ship is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired. In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if repaired; or

(3) In the case of damage to goods, the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.

§431: -107 Effect of constructive total loss. Where there is a constructive total loss the insured may either treat the loss as a partial loss, or abandon the subject-matter insured to the insurer and treat the loss as an actual total loss.

§431: -108 Notice of abandonment. (a) Where the insured elects to abandon the subject matter insured to the insurer, the insured is required to give notice of abandonment. If the insured fails to do so, the loss shall be treated as a partial loss.

(b) Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by word of mouth, and may be given in any terms that indicate the intention of the assured to abandon one's insured interest in the subject matter insured unconditionally to the insurer.

(c) Notice of abandonment shall be given with reasonable diligence after the receipt of reliable information of the loss. Where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry.

(d) Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the insurer is refusal to accept the abandonment.

(e) The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer after notice is not acceptance.

(f) Where notice of abandonment is accepted, the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice.

(g) Notice of abandonment is not required where, at the time when the insured receives information of the loss, there would be no possibility of benefit to the insurer if notice were given to the insurer.

(h) Notice of abandonment may be waived by the insurer.

(i) Where an insurer has re-insured the insurer's risk, no notice of abandonment need be given by the insurer.

§431: -109 Effect of abandonment. (a) Where there is a valid abandonment, the insurer is entitled to take over the interest of the insured in whatever may remain of the subject matter insured, and all proprietary rights incidental thereto.

(b) Upon the abandonment of a ship, the insurer is entitled to any freight in course of being earned, and that is earned by her subsequent to the casualty causing the loss, less the expenses of earning it incurred after the casualty; provided that where the ship is carrying the owner's goods, the insurer is entitled to a reasonable remuneration for the carriage of them subsequent to the casualty causing the loss.

PART XI. PARTIAL LOSSES (INCLUDING SALVAGE AND

GENERAL AVERAGE AND PARTICULAR CHARGES)

§431: -111 Particular average loss. (a) A particular average loss is a partial loss of the subject matter insured, caused by a peril insured against, and that is not a general average loss.

(b) Expenses incurred by or on behalf of the insured for the safety or preservation of the subject matter insured, other than general average and salvage charges, are particular charges. Particular charges are not included in particular average.

§431: -112 Salvage charges. (a) Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils.

(b) For the purposes of this section, "salvage charges" mean the charges recoverable under maritime law by a salvor independently of contract. Salvage charges do not include the expenses of services in the nature of salvage rendered by the insured or the insured's agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Those expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstances under which they were incurred.

§431: -113 General average loss. (a) A general average loss is a loss caused by or directly consequential on a general average act and includes a general average expenditure as well as a general average sacrifice.

(b) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperiled in the common adventure.

(c) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a ratable contribution from the other parties interested. The ratable contribution is a general average contribution.

(d) Subject to any express provision in the policy, where the insured has incurred a general average expenditure, the insured may recover from the insurer in respect of the proportion of the loss that falls upon the insured; and, in the case of a general average sacrifice, the insured may recover from the insurer in respect of the whole loss without having enforced the insured's right of contribution from the other parties liable to contribute.

(e) Subject to any express provision in the policy, where the insured has paid, or is liable to pay, a general average contribution in respect of the subject insured, the insured may recover the contribution from the insurer.

(f) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of, a peril insured against.

(g) Where ship, freight, and cargo, or any two of those interests, are owned by the same insured, the liability of the insurer in respect of general average losses or contributions is determined as if those interests were owned by different persons.

PART XII. MEASURE OF INDEMNITY

§431: -121 Extent of liability of insurer for loss. (a) The measure of indemnity is the sum that the insured can recover in respect of a loss on a policy by which the insured is insured, in the case of an unvalued policy to the full extent of the insurable value, or, in the case of a valued policy to the full extent of the value fixed by the policy.

(b) Where there is a loss recoverable under the policy, the insurer, or each insurer if there be more than one, is liable for the proportion of the measure of indemnity that insurer's subscription bears to the value fixed by the policy in the case of a valued policy, or to the insurable value in the case of an unvalued policy.

§431: -122 Total loss. Subject to any express provision in the policy, where there is a total loss of the subject matter insured:

(1) If the policy be a valued policy, the measure of indemnity shall be the sum fixed by the policy; and

(2) If the policy be an unvalued policy, the measure of indemnity shall be the insurable value of the subject matter insured.

§431: -123 Partial loss of ship. Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows:

(1) Where the ship has been repaired, the insured shall be entitled to the reasonable cost of the repairs, less the customary deductions, but not exceeding the sum insured in respect of any one casualty;

(2) Where the ship has been only partially repaired, the insured shall be entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the unrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above; and

(3) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the insured shall be entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage, computed as above.

§431: -124 Partial loss of freight. Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is the proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the proportion of freight lost by the insured bears to the whole freight at the risk of the assured under the policy.

§431: -125 Partial loss of goods, merchandise, etc. Where there is a partial loss of goods, merchandise or other moveables, the measure of indemnity, subject to any express provision in the policy, is as follows:

(l) Where part of the goods, merchandise or other moveables insured by a valued policy is totally lost, the measure of indemnity shall be the proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy;

(2) Where part of the goods, merchandise, or other moveables insured by an unvalued policy is totally lost, the measure of indemnity shall be the insurable value of the part lost, ascertained as in case of total loss; and

(3) Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity shall be the proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged valued at the place of arrival bears to the gross sound value.

As used in this section, "gross value" means the wholesale price, or, if there is no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that, in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value.

"Gross proceeds" means the actual price obtained at a sale where all charges on sale are paid by the sellers.

§431: -126 Apportionment of valuation. (a) Where different species of property are insured under a single valuation, the valuation shall be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is the proportion of the total insured value of the same as the insurable value of the part bears to the insurable value of the whole ascertained in both cases as provided under this article.

(b) Where a valuation is required to be apportioned, and particulars of the prime cost of each separate species, quality, or description of goods cannot be ascertained, the division of the valuation may be made over the net arrived sound values of the different species, qualities, or descriptions of goods.

§431: -127 General average contributions and salvage charges. (a) Subject to any express provision in the policy, where the insured has paid, or is liable for, any general average contribution, the measure of indemnity is the full amount of such contribution, if the subject matter liable to contribution is insured for its full contributory value. If only part of the subject matter is insured, the indemnity payable by the insurer shall be reduced in proportion to the under insurance, and where there has been a particular average loss that constitutes a deduction from the contributory value, and for which the insurer is liable, that amount shall be deducted from the insured value in order to ascertain what the insurer is liable to contribute.

(b) Where the insurer is liable for salvage charges, the extent of the insurer's liability shall be determined on the like principle.

§431: -128 Liabilities to third parties. Where the insured has effected an insurance in express terms against any liability to a third party, the measure of indemnity, subject to any express provision in the policy, is the amount paid or payable by the insured to the third party in respect of the liability.

§431: -129 General provisions as to measure of indemnity. (a) Where there has been a loss in respect of any subject matter not expressly provided for under this article, the measure of indemnity shall be ascertained, as nearly as may be, in accordance with this article, in so far as applicable to the particular case.

(b) Nothing in this article relating to the measure of indemnity shall affect the laws relating to double insurance, or prohibit the insurer from disproving interest wholly or in part, or from showing that at the time of the loss the whole or any part of the subject matter insured was not at risk under the policy.

§431: -130 Particular average warranties. (a) Where the subject matter insured is warranted free from particular average, the insured shall not recover for a loss of part, other than a loss incurred by a general average sacrifice, unless the contract contained in the policy is apportionable; provided that if the contract is apportionable, the insured may recover for a total loss of any apportionable part.

(b) Where the subject matter insured is warranted free from particular average, either wholly or under a certain percentage, the insurer is liable for salvage charges, and for particular charges and other expenses properly incurred pursuant to the provisions of the suing and labouring clause in order to avert a loss insured against.

(c) Unless the policy otherwise provides, where the subject matter insured is warranted free from particular average under a specified percentage, a general average loss shall not be added to a particular average loss to make up the specified percentage.

(d) For the purpose of ascertaining whether the specified percentage has been reached, only the actual loss suffered by the subject matter insured shall be considered. Particular charges and the expenses of and incidental to ascertaining and proving the loss shall be excluded.

§431: -131 Successive losses. (a) Unless the policy otherwise provides, and subject to this article, the insurer is liable for successive losses, even though the total amount of the losses may exceed the sum insured.

(b) Where, under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the insured can only recover in respect of the total loss; provided that nothing in this section shall affect the liability of the insurer under the suing and labouring clause.

§431: -132 Suing and labouring clause. (a) Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the insured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject matter may have been warranted free from particular average, either wholly or under a certain percentage.

(b) General average losses and contributions and salvage charges, as defined by this article, are not recoverable under the suing and labouring clause.

(c) Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.

(d) The insured and the insured's agents, in all cases, shall take all reasonable measures to avert or minimize a loss.

PART XIII. RIGHTS OF INSURER ON PAYMENT

§431: -141 Right of subrogation. (a) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject matter insured, the insurer is entitled to take over the interest of the insured in any remaining subject matter paid for, and the insurer is subrogated to all the rights and remedies of the insured in and in respect of that subject matter as from the time of the casualty causing the loss.

(b) Subject to the foregoing provisions, where the insurer pays for a partial loss, the insurer acquires no title to the subject matter insured or any remaining part of it, but the insurer is subrogated to all rights and remedies of the insured in and in respect of the subject matter insured as from the time of the casualty causing the loss, in so far as the insured has been indemnified, according to this article, by the payment for the loss.

§431: -142 Right of contribution. (a) Where the insured is over-insured by double insurance, each insurer is bound, as between the insurer and the other insurers, to contribute rateably to the loss in proportion to the amount for which the insurer is liable under the contract.

(b) If any insurer pays more than the insurer's proportion of the loss, the insurer is entitled to maintain an action for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than one's proportion of the debt.

§431: -143 Effect of under insurance. Where the insured is insured for an amount less than the insurable value or, in the case of a valued policy, for an amount less than the policy valuation, the insured is deemed to be the insured's own insurer for the uninsured balance.

PART XIV. RETURN OF PREMIUM

§431: -151 Enforcement of return. Where the premium or a proportionate part of it, by this chapter, is declared to be returnable, then:

(1) If already paid, it may be recovered by the insured from the insurer; or

(2) If unpaid, it may be retained by the insured or the insured's agent.

§431: -152 Return by agreement. Where the policy contains a stipulation for the return of the premium, or a proportionate part thereof, on the happening of a certain event, and that event happens, the premium, or the proportionate part thereof, is returnable to the insured.

§431: -153 Return for failure of consideration. (a) Where the consideration for the payment of the premium totally fails, and there has been no fraud or illegality on the part of the insured or the insured's agents, the premium shall be returnable to the insured.

(b) Where the consideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium, under the like conditions, shall be returnable to the insured:

(1) Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the insured; provided further that if the risk is not apportionable, and has once attached, the premium is not returnable;

(2) Where the subject matter insured, or part thereof, has never been imperiled, the premium, or, as the case may be, a proportionate part thereof, is returnable; provided that where the subject matter has been insured "lost or not lost" and has arrived in safety at the time when the contract is concluded, the premium is returnable unless, at that time, the insurer knew of the safe arrival;

(3) Where the insured has no insurable interest throughout the currency of the risk, the premium is returnable; provided that this clause does not apply to a policy effected by way of gaming or wagering;

(4) Where the assured has a defeasible interest that is terminated during the currency of the risk, the premium is not returnable;

(5) Where the insured has over-insured under an unvalued policy, a proportionate part of the several premiums is returnable; and

(6) Subject to the foregoing, where the insured has over-insured by double insurance, a proportionate part of the several premiums is returnable; provided that, if the policies are effected at different times, and any earlier policy has at any time borne the entire risk, or if a claim has been paid on the policy in respect of the full sum insured thereby, no premium is returnable in respect of that policy, and when the double insurance is effected knowingly by the assured no premium is returnable.

PART XV. MUTUAL INSURANCE

§431: -161 Modification of article in case of mutual insurance. (a) Where two or more persons mutually agree to insure each other against marine losses, there is said to be a mutual insurance.

(b) This article in so much as it relates to the premium do not apply to mutual insurance, but a guarantee, or such other arrangement as may be agreed upon, may be substituted for the premium.

(c) This article, in so far as it may be modified by the agreement of the parties, may in the case of mutual insurance be modified by the terms of the policies issued by the association, or by the rules and regulations of the association.

(d) Subject to this section, this article applies to a mutual insurance.

PART XVI. SUPPLEMENTAL

§431: -171 Ratification by assured. Where a contract of marine insurance is in good faith effected by one person on behalf of another, the person on whose behalf it is effected may ratify the contract even after the person is aware of a loss.

§431: -172 Implied obligations varied by agreement or usage. (a) Where any right, duty, or liability would arise under a contract of marine insurance by implication of law, it may be negatived or varied by express agreement, or by usage, if the usage bind both parties to the contract.

(b) This section extends to any right, duty, or liability declared by this chapter that may be lawfully modified by agreement.

§431: -173 Reasonable time, etc. a question of fact. Where by this article any reference is made to reasonable time, reasonable premium, or reasonable diligence, the question of what is reasonable is a question of fact.

§431: -174 Slip as evidence. Where there is a duly stamped policy, reference may be made, as heretofore, to the slip or covering note, in any legal proceeding.

§431: -175 Interpretation of terms. Unless the context or subject matter otherwise requires:

"Action" includes counter-claim and set off;

"Freight" includes the profit derivable by a shipowner from the employment of the shipowner's ship to carry the shipowner's own goods or moveables, as well as freight payable by a third party, but does not include passage money;

"Moveables" means any moveable tangible property, other than the ship, and includes money, valuable securities, and other documents; and

"Policy" means a marine policy.

§431: -176 Conflict with section 431:1-207 or 431:5-302. If any provision of this article conflicts with any provision of section 431:1-207 or 431:5-302, this article shall control."

SECTION 2. This Act shall take effect on July 1, 2009.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2947
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII