Page 20 - Insurance Times October 2023

at the time the advance is made, then the amount of the of the underwriter to include in his contract an express
loan is to be re-paid together with the interest agreed upon agreement to indemnify the insured for losses arising out of
by the parties. Only in the event of the safe arrival of the general average.
cargo pledged as security, do the creditors have a right to
levy against the debtors, and seize their property in Scams are nothing new and the basics have not changed.
execution after a sale of the security fails to satisfy the claim. The scam by Hegestratos and Zenosthemis is the same as
In other words the debtors are insured to the full amount insurance scams being perpetrated today. Almost everyone
of their loan. In the event that the security fails to arrive has heard of business owners setting their business on fire,
safely at the agreed destination, the entire loss rests upon or other destructive measures, to claim the insurance
the lender, who is, as a matter of fact, the insurer. funds.History is littered with other examples of fraud and
scams – from the early Romans to the more recent
The hazardous nature of the undertaking, from the point of insurance scams in the shipping industry.
view of the lender, seems to have been fully recognized by
the Greeks, particularly in such a commercial center as Over the centuries, fraud has gone hand in hand with money.
Athens. Because the loss of the property hypothecated From the smallest of opportunistic scams to bigger, more
carried with it both loss of principle and interest, the yield organised groups working towards the same fraudulent
on such loans was very much higher than could ordinarily goal. Where there have been opportunities to make money,
be obtained in the ordinary course of lending money. Such there have been fraudsters planning their execution.
contracts, in which the creditor did not undertake the risk,
were prohibited by the Rhodian laws. Today, marine insurance frauds have become more
organised and sophisticated, and often involves falsifying
In the 'bottomry' contract of ancient Greece, while documents and creating false narratives to support the
"Jettison" is specifically mentioned as a reason for insurance claim. To make their claims seem more legitimate,
abatement in the repayment of the loan, the borrower fraudsters may also orchestrate accidents or thefts.
must comply with conditions specified in the contract.
Certain formalities are ordinarily required before goods may They may intentionally harm or dispose of the cargo and then
be jettisoned, even today. In the contract we are claim it was lost at sea due to an unforeseen event like a
considering, if that jettison might be the grounds for a claim storm. Alternatively, they may work with insiders such as
on the part of the debtor against the creditor, it was port officials or crew members to manipulate the cargo
necessary that the property be sacrificed, only after the manifests and claim that more valuable cargo was lost.
adoption of a common resolution by all on board. Whether
this reference to an abatement in the event of jettison The consequences of marine insurance fraud can be severe
extended to the sacrifice of property, other than that for the shipping industry, leading to increased insurance
offered as security for the loan, is not clear. premiums, lower profit margins, and damage to credibility.
Industry estimates indicate that marine insurance fraud
Whether the custom of general average, was known to the costs billions of dollars each year. Furthermore, the potential
Greeks is a point upon which we have no knowledge, but for fraud can discourage investment in the maritime sector
the fact that all on board shall vote to throw over, for the and disrupt international trade.
common good, all or part of the goods of any one of the
*I am thankful to Dr. S. Mukherjee, an Expert and
owners, would seem to imply a liability on their part to
International Investigator for Maritime Fraud for his advice.
compensate for the benefit secured. It would be an
interesting point to determine whether jettison during the
Dr. Soumi Mukherjee completed her Graduation in Mass
course of a voyage, in no way affected the physical value of
Media and Masters in Mass Media from University of
the security, but involved a claim for general average, was
Mumbai, later completed her Ph.d. She is interested in
contemplated as a ground for abatement in the Greek
Investigative Journalism related with History, Geography,
contract of bottomry.
Zoology etc. She is currently serving in Media Officer
with International Police Organization.
In reference to modern insurance practice, it is the custom

The Insurance Times October 2023 19