The vessel owned by K J Shipping was carrying 6,000 tonnes of logs to India
RSA and the Singaporean arm of AXA are being sued for over $415,000 after an explosion on a cargo ship prevented delivery of 6,000 tonnes of logs.
Alongside Bermuda-based Allied World Assurance, the three insurers are facing the lawsuit from K J Shipping, which owned the vessel MV Wisdom when it suffered a crackcase explosion in the Bay of Bengal on 28 December 2010.
Court papers on behalf of K J Shipping state the insurers are “wrongfully in breach” of general average claim guarantees made between the insurers and the shipper, by their refusal to make payment on the incident.
K J Shipping is claiming the amount due from RSA and/or Allied World through the agreements is $400,000. Another $16,500 is demanded from AXA Insurance Singapore, now known as Red Switch. Additional interest and costs are also being sought by K J Shipping.
RSA’s Hong Kong branch had provided the initial marine policy to K J Shipping. This branch was transferred to Allied World in April 2015, and K J Shipping is claiming one of or both firms remain liable.
Guarantees
General average is a loss mitigation method in shipping, where the loss suffered by particular parties in the venture is proportionately reimbursed by the ship owners and all those with cargo interests.
The cargo ship was delivering the 6,000 tonnes of logs to New Mangalore, India, from Yangon, Myanmar, when the explosion left the ship adrift and without motive power. Court papers revealed the engine damage was too severe to be repaired, and the cargo was subsequently shipped to its destination on a different vessel.
The court documents state 36 bills of lading were issued for the cargo onboard the vessel.
K J Shipping is claiming these bills included in them details of how the cargo interests would be included in a general average to calculate the overall value of the loss to be claimed.
The terms of the bills are quoted in court papers as saying: “The merchant (shipper) shall contribute with the carrier in general average to the payment of any sacrifice, losses or expenses of a general average nature that may be made or incurred, and shall pay salvage and special charges incurred in respect of the goods.”
The loss adjuster responsible for determining this general average issued its estimate in June 2013. A copy of the adjustment was sent to the insurers in January 2016.
K J Shipping is claiming there were guarantees in the policies taken with RSA and AXA Singapore that require payment of the sums estimated.
The claim document references both guarantees, issued on materially identical terms, which states the insurers would pay the ship-owners “any contribution to general average and/or salvage and/or special charges which may hereafter be ascertained to be properly due in respect of the said goods”.
RSA, AXA and Allied World were contacted for their response.
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