【Summary】

After a shipment of dried cassava from Thailand ordered by Jinyimeng Group Co., Ltd arrived at itsport of destination on the M.V. SUN WINNER II, much of the unloaded dried cassava was found to have been damaged due to water leakage in the cargo hold. Jinyimeng Company promptly reported the claim to its insurance provider, Pacific Insurance Qingdao Branch, but the two parties failed to reach an agreement on the extent of the damage inflicted upon the cargo. In order to reduce the loss of profits,Jinyimeng Company decided to auction the damaged cassava. At the buyer’s request, Pacific Insurance Qingdao Branch would subsequently organize an auction on its behalf for the damaged cassava, where a Guangzhou-based company ultimately won after submitting a successful bid. However, due to the deteriorating quality of the dried cassava that occurred throughout the auction process, the company refused to pick up the goods, leading to further deterioration of the cassava to the point of total loss, necessitating its disposal. Subsequently, Jinyimeng Company filed suit to the Nanjing Maritime Court, requesting that China Pacific Property & Casualty Insurance Qingdao Branch pays for the total loss of the goods, and China Pacific Property & Casualty Insurance Qingdao Branch pay in advance according to the difference between the original value of the damaged goods and the auction price.

【Judgment】

The Nanjing Maritime Court ruled that, in this case, the focal point of the dispute is establishing when the insurance liability of the contract signed between the two parties involved in this case elapsed. According to the "warehouse-to-warehouse" clause in the insurance contract, the period of insurance liability is when the goods arrive at the insured for distribution, distribution, or storage. In other words, the insurance liability period will not end, and so long as the owner unloads the damaged cassava and stores it in the storage yard to reduce the amount of damage prior to making the next step to redistribute and sell the damaged goods. However, since the successful sale of the damaged goods via auction, and due to the fact that the dockyard where the goods were located had been converted from a temporary storage place for goods to a storage place for distribution, China Pacific Property & Casualty Insurance Qingdao Branch no longer bore responsibility for the risk of secondary damage to the goods after such transaction as the insurance liability period is now terminated. The additional damage sustained to the goods was due to high temperatures and rain during summer, in addition to the goods being continuously stored in the open-air dockyard. Thus, the failure of the buyer to adopt reasonable and effective storage measures was the root cause of the eventual total loss of the goods. Consequently, the buyer has no right to require its insurance provider to bear liability for the expanded losses, and the Nanjing Maritime Court ruled against Jinyimeng Company’s request for China Pacific Property & Casualty Insurance Qingdao Branch to pay the total value of the goods due to total loss as originally requested in accordance with the law. After the verdict was issued, neither party appealed, ending the dispute.

【Significance】

Maritime transportation is the most important mode of transportation in international trade. Consequently, the insurance of Maritime cargo transportation plays an important role in mitigating the risks of maritime transportation and promoting the development of foreign trade, transportation, and finance. Reasonably determining the rights and obligations of the insurer and the insured is a prerequisite for stabilizing the shipping insurance market. The insurance dispute involved in the case occurred during the process of international marine transportation. The

judgment of this case made by the Nanjing Maritime Court reasonably defined the termination time of the "warehouse-to-warehouse" clause of the marine insurance contract and determined that the risk of secondary damage after the damaged goods were auctioned by the buyer should no longer be covered by the insurance company. At the same time, it further clarified the insured has an obligation to reduce losses after the occurrence of the insured event—that the insured's obligation to reduce losses will not be transferred to the insurer due to the negligence of the insured to prevent further damage to the goods. This recognition is a positive precedent set to

clarify the rights and obligations between the insurer and the insured, guiding port and shipping companies and shipping insurance companies to operate in compliance, avoiding risks, and promoting the prosperity and stability of the shipping insurance market.

[Case No.] (2022) Su 72 Min Chu No. 227