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The Supreme Court of Latvia decided in favour of If P&C Insurance (represented by VILGERTS) in the dispute with Liepajas Metalurgs regarding use of inappropriate vessel for carriage under an open cargo policy subject to ICC (A).

The insurance contract (subject to Latvian law) had a condition that steel bars can be shipped by use of vessels not older than built in 1981. In the particular case the cargo owner (claimant) had used a vessel built in 1978 and thus had breached the conditions of the insurance contract. During the voyage in December 2012 sea water entered the hull and damaged the steel bars. In February 2013 the claimant brought a claim for damages against If P&C Insurance in the amount of EUR 1,283,814 plus litigation costs.

The claimant argued that the insurer should pay because it implicitly accepted an older vessel and the risk was insured under ICC(A). Liepajas Metalurgs was of the opinion that the insurer should have reacted immediately when its automated cargo declaration received data about the name (not age) and IMO number of the vessel.

The cargo declaration system automatically issued a cargo insurance slip and invoiced the premium. In the opinion of the claimant, the defendant should have known or should have been able to determine the age of the vessel, but the insurer did not react until the cargo damage occurred.

In the opinion of Liepajas Metalurgs, the insurer had waived its rights to decline the older vessel because older vessels were used under the same contract previously and by issuing a formal confirmation of cover.

The court ruled that the insurance slip only confirmed existance of the insurance contract. The insured should have informed the insurer about increased risk due to chartering an older than agreed vessel under the insurance contract. Also, the automated cargo declaration system did not permit the claimant to enter data about vessels that are built before 1981. The electronic declaration of the cargo did not amend the insurance contract and the claimant’s claim was dismissed.

VILGERTS litigation team, led by Janis Kubilis and Aivars Lošmanis, acted for If P&C Insurance Latvia branch.