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The Case PAO Slavyansky Shipyard and AO Insurance Company of the Gas Industry

The Case PAO Slavyansky Shipyard and AO Insurance Company of the Gas Industry on the collection of insurance recovery in connection with the grounding of a vessel

The case addresses the following issues:

- the seaworthiness of the vessel
- the obligation of the shipowner to check the documents of the crew
- the obligation of the shipowner to man the ship
- the legal status of the conclusion of the state maritime supervision on the investigation of the accident

On 18 June 2024, the Arbitrazh Court of the Far Eastern District (Khabarovsk, Russia) considered the case of PAO Slavyansky Shipyard (Claimant) and AO Gas Industry Insurance Company (Respondent) for the insurance recovery in the amount of 34 million Roubles.

The Court considered the Respondent's cassation appeal to challenge the judgements of the Courts of the first and appellate instances. The lower Courts granted the claim in full. The Court of Cassation overturned these judicial acts and sent the case for a new trial.

Facts of the case:

The Claimant owns the vessel "Chernomorets-34" (Vessel).

The Claimant and the Respondent entered into an insurance contract for the vessel. The insurance contract covers the risks of loss and damage to the Vessel.

In 2020, Typhoon Masak stranded the Vessel. The Vessel received significant damage to the hull and equipment. Crew members died.

The State Maritime Supervision investigated the accident and found:

- improper management and technical operation of the Vessel,
- violation of the work schedule, rest of the crew, safe working conditions,
- violations in providing the crew for the Vessel,
- violations of the charter agreement by the charterer, leading to the absence of a shelter berth,
- errors of the Vessel’s crew, which did not prepare the Vessel for stormy navigation,
- the captain was not on the Vessel at the time of the accident.

The Respondent refused to pay insurance compensation and did not recognize the accident as an insured event.

Respondent's arguments:

The Vessel was unseaworthy because the Vessel was not equipped with the necessary and qualified crew. During the investigation, it was revealed that the diplomas of the captain, chief mate and senior electrical engineer were not listed in the database of the diploma department of the captain of the seaport of Vladivostok.

In addition, the qualification class of the Vessel was violated. The Vessel was in a navigation area that did not comply with the Vessel class restrictions.

Position of the Courts of the first and second instance:

The Vessel was seaworthy. The Vessel was equipped with the required crew according to the minimum crew certificate. At the time of the accident, the Vessel had nine crew members, which exceeded the minimum requirements.

The Claimant could not have discovered at the stage of employment of the captain and chief mate that they had false qualification documents.

The bay in which the Vessel carried out work corresponded to the qualification certificate.

The opinion of the state maritime supervision cannot allocate fault and determine liability for insurance purposes. The purpose of the opinion is to develop recommendations for the prevention of accidents at sea.

Position of the Court of Cassation:

The Court of Cassation did not agree with the findings of the courts of the first and second instance.

The opinion of the state maritime supervision was issued on the basis of an investigation, which included the collection and analysis of evidence and identification of the causes of the accident. The Courts should have considered the opinion as one of the essential evidence of the fact and cause of the accident.

The Claimant, in case of disagreement with the opinion of the state maritime supervision, had the right to challenge the said opinion in the manner prescribed by law, but the Claimant did not exercise this right.

Case No. F03-1972/2024
Shipping and Transport Insurance and Reinsurance