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Russian Insurer Soglasie Refused to Pay Insurance Claim of the Shipowner for a Fire on the Vessel

The Russian insurer Soglasie refused to pay insurance compensation to the shipowner for a fire on the vessel, saving about two million US dollars.

Russian state courts sided with the insurer.

Shiping LLC insured the ship with the Insurance Company Soglasie LLC (Russia). During the repair of the ship Sobrey in the dry dock of Romania, as a result of welding work, a fire broke out. The repair was carried out by the NAVALINK shipyard.

The insurer refused to pay the insurance indemnity, referring to the fact that the insurance does not cover the repair period of the vessel. The shipowner did not agree with the refusal and demanded insurance payment in the amount of 1.7 million US dollars. The shipowner tried to prove to the court that the insurance rules cover the damage caused by ship repair companies. However, the courts of first and second instance sided with the insurer.

The insurer argued that the period of operation of the vessel is understood as the period of time within which the vessel is used for its intended purpose. Taking into account the interpretation of the term "operation of the vessel", the insurer stated that the vessel was insured only for the time of its operation - that is, for the period of use for its intended purpose.

On 10 July 2023, the Ninth Arbitrazh Court of Appeal considered the appeal of Shipping LLC against the decision of the Moscow Arbitrazh Court and rejected the shipowner's claim.

In the case, there are other arguments of the parties regarding the operation of the ship and the compliance of the ship's design with the rules of the classification society.

In order to avoid refusals in insurance payment, the following can be recommended to shipowners:

1) Carefully choose an insurance company, track its litigation and arbitration history,
2) Provide clear clauses on insurance coverage in insurance contracts, carefully check the insurance contract,
3) Immediately after the insured event, engage an insurance / maritime lawyer who is able to carry out the settlement of the insured event and has experience in collecting special evidence for the payment of insurance compensation, experience in correspondence with the insurance company,
4) Negotiate arbitration clauses - to ensure that maritime disputes are considered by arbitrators with specialized knowledge,
5) Conduct negotiations and mediation.

Case number: А40-275143/2022
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