The floating crane vessel Fu Jing 001, owned by Fujian Huajing Marine Technology Company (Fujian Huajing), was anchor-dragged twice in 2022 while sheltering at Yangjiang Port’s No. 2 anchorage due to Typhoon Chaba, Guangdong’s most severe typhoon in two decades. Amid the ensuing collisions severely damaging turbines, and damage from submarine cables at Shapa offshore wind farm, the vessel sank. The vessel was insured under a policy underwritten by Ping An Property & Casualty Insurance (Ping An P&C) and its Guangdong branch for an agreed insured sum of USD75 million (RMB516.3 million), and deductible of USD1 million.
Parties claiming damages subsequently sought about RMB547 million in compensation, with Fujian Huajing filing a claim for the vessel’s total loss. But although the Guangdong branch confirmed total loss, it declined to pay. Fujian Huajing subsequently sought joint and several payment of the USD75 million insured sum plus interest from both defendants.
Points of contention
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Guantao Law Firm
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The counterparty. The policy document carried the corporate seal of Ping An P&C, yet all related acts – including premium billing and receipt, accident-related correspondence and rejection letter – were performed by the Guangdong branch holding itself as principal. In view of established market usage, the court held that Fujian Huajing and the Guangdong branch had entered into a binding marine insurance relationship.
Performance of disclosure obligations. Ping An P&C and its Guangdong branch argued that Fujian Huajing breached its duty of disclosure by concealing a bareboat charter and change in ship management. The court determined that the registered bareboat charter was, in reality, a form of financial security; the nominal charterer never assumed physical possession or operational control, and there was no substantive change in who managed the vessel. The arrangement had also been made public.
The insurers had posed no questions on these points and failed to show that the information would have affected their decision to accept the risk or set the premium. The court therefore concluded that Fujian Huajing had complied with its duty of disclosure.
Performance of warranty. The policy imposed express warranties, including completion of specified surveys within 30 days and prior approval for towing operations. On examination, the court noted that Fujian Huajing had engaged DNV to perform the required surveys within the stipulated period, and any corrosion identified was rectified without compromising the vessel’s seaworthiness.
The tow at issue was an emergency manoeuvre executed shortly before the typhoon’s arrival, involved a short distance, and did not necessitate a formal fitness-to-tow certificate.
No contravention of the policy could be presumed and the court concluded that Fujian Huajing had complied with its warranties.
Seaworthiness and causation. The defendants argued that the vessel was unseaworthy, citing deficiencies in anchoring equipment and the manager’s credentials. The court observed that the vessel possessed a current seaworthiness certificate, the official accident investigation did not declare it unseaworthy, and its anchoring arrangements met regulatory requirements.
Several other vessels anchored in the same area also dragged, and the number of anchors carried was not shown to have contributed to the incident. The manager’s lack of construction qualifications was unrelated to the sinking, and the crew were duly certified.
As to why the accident occurred, the court held that Typhoon Chaba’s severity was unforeseeable. The anchorage selection had received implied consent from the harbour authorities, and a longer-distance move would have heightened exposure. The decision was therefore prudent. Accordingly, the typhoon was the objective cause of the loss.
Performance of mitigation obligations. The defendants argued that the ship manager’s delayed acceptance of salvage services had aggravated the damage. The court found that following the initial dragging of anchors, the vessel was initially brought under control. But when it dragged a second time, a distress call was promptly made.
Yet owing to extremely high wind strengths reaching level 13, and visibility under 50 metres, several towline connections by rescue vessels failed. On this basis, the court ruled that Fujian Huajing had satisfied its duty to mitigate loss.
Rulings
The court ruled that the incident was covered by the policy, rendering the Guangdong branch liable for indemnity, with Ping An P&C directed to assume supplementary liability should the branch’s assets be inadequate. Property damage claims relating to the wind farm turbines and cables were resolved by court-brokered settlement, with Fujian Huajing paying compensation via the Maritime Limitation Fund.
Lessons
Insurers must reinforce holistic risk governance.
- Before binding cover, administer a comprehensive risk questionnaire to confirm in writing key particulars such as ownership, operator and charter arrangements. Prominently flag express warranties, exclusions and deductibles, and secure the insured’s written confirmation.
- After inception, operate periodic risk reviews to detect material changes, and adapt coverage. Maintain up-to-date contingency plans. Following an incident, conduct prompt site inspections to secure evidence, co-ordinating with harbour authorities for official documentation.
- In claims handling, observe the principles of fairness and utmost good faith. Avoid arbitrary repudiation; apply deductibles only where justified; and furnish clear grounds and proof for any declinature.
Assureds must observe continuous compliance obligations.
- Before inception, provide accurate and complete disclosure of the vessel’s technical status and operating profile. Review policy wordings carefully, taking independent legal advice if needed, to confirm cover matches risk.
- During the insurance term, adhere to all contractual duties relating to surveys and operational standards. Establish and maintain effective safety management, regular equipment maintenance, crew training and emergency exercises. Safeguard documentary evidence such as survey certificates and deck logs.
- Following an incident, act promptly to minimise damage – call for assistance and co-operate with salvors. Notify the underwriter without delay and furnish truthful, comprehensive claim particulars. If a declinature appears unjustified, retain records of all communications and rejection letter, seeking recourse through negotiation, mediation or court proceedings.
Takeaway
Marine insurance litigation is governed principally by the Maritime Code, but the court will also consider contractual provisions, sectoral usage and concrete facts surrounding the loss.
Where damage stems from an “act of god” – such as a typhoon – the boundary between force majeure and the party’s own fault must be carefully drawn. Force majeure affords no blanket immunity; the critical inquiry is whether the party fulfilled its duty of reasonable care.
Li Ling is a partner at Guantao Law Firm. He can be contacted by phone at +86 139 5030 8280 or by email at liling@guantao.com
