Effects of Insurance on Maritime Liability Law

Introduction In a developed society, most individuals and corporations purchase insurance against any possible liability they might incur in a host of activities they engage themselves in.1 Ship owners are no exception in this regard. In fact, ship owners’ liability insurance is one of the most extensive liability insurance in the world.2 There is hardly any aspect of maritime liability which is not covered by the corresponding liability insurance.3 Yet, there is little discussion on various questions related to the effect of insurance’s absence or its presence on maritime liability law.

What benefits insurance in general and liability insurance in particular have in our commercial activities including shipping? If insurance is a beneficial riskmanagement strategy, what are the other alternative risk-management measures ship owners and policymakers devised in the pre-insurance era? Should those measures continue to exist today when commercial insurance is available?

What should be the goal of liability law when both liability claimants and liable parties are usually insured against their respective losses and liabilities? Does the presence of liability insurance reduce the deterrent effect of liability law? Or can we say that the presence of liability insurance actually improves deterrence?

These are the questions we will attempt to answer in this book and we will do so in the context of maritime law and from the perspective of law and economics. Few areas of liability law are as influenced as that of maritime liability law both by the absence of insurance in the past and by its widespread presence today. While the evolution of maritime liability law in its many aspects is closely connected to that of marine insurance, some aspects of maritime liability law may appear quite

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