Merchant Shipping Code of Ukraine (Edition of July 04, 2013)

SECTION VIII. Marine Insurance.

Chapter 1. Marine Insurance Contract.

Clause 239. Definition of Contract.

In accordance with marine insurance contract, the Insurer shall undertake to compensate the Insured or other person to whose favor the Contract has been concluded, for suffered damage or losses at the advent of the dangers or occurrences to which the insured person is exposed (insured accident) and which are covered by the Contract, for the stipulated payment (insurance premium).

Clause 240. Proofs of Conclusion of Contract.

Presence and contents of the Contract may be proven by written evidence only.

Clause 241. Scope of Applicant of Contract.

The rules of this Chapter shall apply unless otherwise agreed upon by the parties. However, in the cases directly indicated in this Chapter an agreement not corresponding to these rules shall be invalid.

Clause 242. Objects of Insurance.

The object of marine insurance may be any property interest related to navigation, namely: a vessel, including the one under construction; cargo; freight; carriage fare; hire or rent payment; revenue expected from cargo and marine demands secured by vessel, cargo and freight; wages and other kinds of award due to the Master and other members of the crew; civil or property liability of the Shipowner and the Carrier as well as the risk taken on by the Insurer (re-insurance).

The object of insurance shall be indicated in the Contract.

Marine Insurance Contracts with Insured Residents and Compulsory Insurance Contracts against accidents during carriage by sea to be concluded by Insurers, who are to be acknowledged as those in accordance with the legislation of Ukraine, must have a license got in the established order to carry out this type of Insurance and must be members of the Marine Insurance Company. The Marine Insurance Company coordinates insurers' activities in the field of insuring marine risks and represents theit interests in International Unions of Insurers.

Establishment of the Marine Insurance Company and its state registration to be carried out in the order established be the Cabinet of Ministers of Ukraine.

Clause 243. Information on Level of Risk.

Upon concluding the Contract, the Insured (party) shall undertake to inform the Insurer of the circumstances bearing essential importance on determination of the level of risk and known or supposed to be known by the Insured as well as to provide the data requested by the Insurer.

The Insured shall be free of said obligation in respect to generally known data as well as data that are known or are supposed to be known by the Insurer.

Should the Insured not inform the Insurer of the relevant data or provide incorrect data, the Insurer shall have the right to cancel the Contract.

Clause 244. Insurance Policy.

The Insurer shall undertake, on request of the Insured, to issue him a document signed by Insurer that contains the terms of a marine insurance contract (policy, insurance certificate, etc.).

Clause 245. Insurance Premium.

The Insured shall undertake to pay to the Insurer an insurance premium within a stipulated term. The Contract shall not come into force until said premium is paid if it is not stated otherwise therein.

Clause 246. Contract in Favor of Third Party.

The Contract may be concluded by the Insured in favor of the third party stated or not stated therein.

If the Contract has been concluded in favor of the third party, the Insured bears all responsibilities by the Contract. The same responsibilities shall be borne by the person (party) in whose favor the Contract is made, in case the Contract has been concluded on order of said party or, even without such an order, when said party would give his consent for insurance afterwards.

When providing for insurance in favor of the third party, the Insured shall have all the rights in accordance with the Contract without a special power of attorney issued by said party.

Clause 247. Producing Policy to Insurer.

When paying an insurance compensation, the Insurer shall have the right to demand producing the policy or other insurance document issued by the Insurer.

Clause 248. Alienation of Insured Cargo.

In case an insured cargo be alienated, the Contract shall be valid, all rights and obligations of the Insured being passed over to the party who acquires said cargo.

If, prior to cargo alienation, the insurance premium has not been paid, an obligation for paying it shall rest both with the Insured and the acquirer of said cargo. However, the demands of paying said premium shall have no force in respect to the holder of the policy or equivalnt document including a remark that said premium has not been paid.

Clause 249. Alienation of Insured Vessel.

In case an insured vessel be alienated, the Contract shall terminate from the moment of alternation. However, if the vessel has been alienated during the voyage, the Contract shall be valid until the end of the voyage, and the rights and obligations of the Insured pass over to the acquirer of the vessels.

Clause 250. Sum Insured.

When concluding the Contract, the Insured shall declare a sum of his insured interest (sum insured). If the sum insured that has been declared is lower than an actual value of the insured interest (value insured), the Insurer shall be liable for the losses in proportion to the ratio of the sum insured to the value insured.

If the sum insured that has been declared exceeds the value insured, the Contract shall be invalid in respect of that part of the sum insured that exceeds the value insured.

Clause 251. Sum Insured Exceeding Value Insured.

If the interest has been insured with several Insurers at the sums that, if added, exceed the value insured, all Insurers concerned shall be liable within the limits of the value insured only, each in proportion to the sum insured, in accordance with the Contract concluded by him.

Clause 252. Preservation of Validity of Contract When a Possibility of Occurrence of Insurable Incident is Excluded.

The Contract shall be valid even if prior to its conclusion the possibility of the losses to be insured has become nonexistent or said losses have already occurred. However, if the Insurer knew or should have known, when concluding the Contract, that the possibility of insurable accident is nonexistent or the Insured knew or should have known about the losses that already occurred and are to be indemnified by the Insurer, the performance of the Contract shall not be obligatory for the Party who was not aware of said circumstances. The insurance premium shall belong to the Insurer in that case as well when it is not obligatory for him to perform the Contract.

Clause 253. General Policy.

A special agreement (general policy) provides for insuring all cargoes received or dispatched by the Insured during a specified period.

Clause 254. Obligations of Insured in Accordance with General Policy.

The Insured shall undertake to inform the Insurer of each shipping of cargo covered by a general policy, specifying all necessary data immediately on their receipt and, in particular, the name of the vessel carrying the cargo, cargo route and the sum insured. The Insured shall not be free from said obligation even if he receives data on said shipping after the cargo has been delivered undamaged to its destination. If the Insured has not communicated or untimely communicated the relevant data on cargo, the Insurer shall have the right to deny indemnity for said cargo. Besides, the Insurer shall preserve his right for insurance premium that he would have obtained, unless the Insured proves that said non-communication or untimely communication cannot be blamed on him.

If the Insured deliberately communicated said data untimely or did not communicate them at all, or deliberately described said cargo or the sum insured incorrectly, the Insurer shall have the right to cancel the insurance by general policy. Besides, the Insurer shall preserve his right for insurance premium that he should have obtained if the Insured had performed the Contract in good faith and in full volume.

Clause 255. Priority of Policy over General Policy.

On request of the Insured, the Insurer shall undertake to issue the policies or the insurance certificates for separate lots of shipped cargo that fall within the general policy scope. If the contents of said policy or the insurance certificate do not correspond to those of general policy, the policy or insurance certificate shall prevail.

Clause 256. Losses Resulting from Intention of Insured.

The Insurer shall not be liable for losses resulting from the intention or gross carelessness of the Insured, the Shipper or the Consignee as well as their representatives.

Clause 257. Losses Resulting from Unseawortiness of Vessel.

When ensuring the vessel, the Insurer shall not, except for the cases mentioned in Clause 256 of this Code, be liable for losses that have arisen due to the fact that the vessel has been dispatched in an unseaworthy condition unless said condition was caused by latent deficiencies. The Insurer shall as well not be liable for losses caused by dilapidated condition of the vessel or her engines and equipment or by their wear due to time or regular use as well as for losses incurred by loading, with the knowledge of the Insured or his representative, but without the knowledge of the Insurer, substances and objects prone to explosion and self- inflammation unless otherwise provided for in the Contract.

Clause 258. Losses Resulting From Inherent Properties of Cargo.

When insuring the cargo or the expected income, except the cases mentioned in Clause 256 of this Code, the Insurer shall not be liable for losses arising out of inherent properties of the cargo itself (inherent deterioration or damage, diminution, rust, mildew, leaks or breakage, self-ignition, etc) as well as for the losses originating from inadequate packing.

Clause 259. Exemption of Insurer from Liability When Insuring Freight.

When insuring freight, the rules of Clauses 256, 257 and 258 shall apply.

Clause 260. Nuclear Damage (Losses).

The Insurer shall not be liable for losses resulting from the effects of nuclear explosion, radiation or radioactive contamination, unless stated otherwise by the rules of this Code.

Clause 261. War Risks, Piracy, Arrest.

The Insurer shall not be liable for losses originating from any war/military actions or measures and their consequences, vessel seizure, acts of piracy, civil commotions or mutinies, lockouts, strikes as well as confiscation, requisition, arrest or destruction of the vessel or cargo on demand of military or civil authorities.

Clause 262. Declaration of Insured on Change of Insured Interest.

The Insured shall undertake to notify the Insurer immediately when it becomes known to him, of any essentianal change that occurred in or relative to the insured object (reloading, transshipment, change of transportation mode or port of loading, deviation from the determined or customary route, leaving vessel for wintering, etc.).

A change leading to an increase of danger shall give the Insurer the right to revise the terms of the Contract or to demand an additional premium and, should the Insured not agree with it, the Contract shall be terminated as of the moment of said change.

Clause 263. Preventing or Lowering Losses.

With an advent of an insurable accident, the Insured shall take all measures within his powers to prevent or lower the losses. He shall immediately notify the Insurer of said advent and shall follow the lat- ter's instructions, if any.

The Insurer shall be free of liability for losses caused by the fact that the Insured did not, deliberately or by flagrant carelessness, take measures for precluding or lowering said losses.

Clause 264. Provision of Installments with General Average.

The Insurer shall, on demand of the Insured, provide a security (a lien) within the limits of the sum insured for paying installments for a general average.

Clause 265. Safeguarding Interests of Insurer at General average by Insured.

When determining the dispatch and making up the average (statement), the Insured shall undertake to safeguard the Insurer's interests.

Clause 266. Exemption of the Insurer from His Contractual Liabilities.

With an advent of an insurable incident the Insurer shall have the right, by paying the sum insured in full, to exempt himself from further obligations in connection with said Contract. He shall be obliged, however to notify the Insured of his intention to exercise said right within seven days from the day of receiving from the latter's notice on the advent of an insured accident and its consequences and, besides, shall reimburse the expenditures of the Insured made exclusively with the purpose of preventing or reducing the losses prior to a receipt of said notification from the Insurer.

If the sum insured has been paid in the instance mentioned in this Clause, the Insurer shall not obtain the rights of the property insured.

Clause 267. Reimbursement of Insured's Expenses by Insurer.

The Insurer shall undertake to reimburse to the Insured necessary expenses made by the latter for preventing or lowering the expenses for which the Insurer is liable as well as the expenses incurred in following the Insurer's instructions (Clause 263. of this Code), for ascertaining and determining the amount of losses subject to reimbursement by the Insurer, and for making up the average.

The expenses mentioned in this Clause shall be reimbursed in proportion to the ratio of the sum insured and the value insured.

Clause 268. Limitation of Liability by Sum Insured.

The Insurer shall be liable for losses within the limits of sum insured only. However, the expenses indicated in clause 266 of this Code as well as the installments on a general average shall be reimbursed by the Insurer irrespective of the fact that these, together with reimbursement of losses, may exceed the sum insured. The Insurer shall be liable for losses arising out of several successive insurable accidents even if the total of said losses exceeds the sum insured.

Clause 269. Subrogation.

When paying the sum insured, excluding the case stipulated by Clause 266 of this Code, the Insurer, with his consent, shall acquire the following rights:

  1. when insuring a full value - all rights for the property insured;
  2. when insui.ng a partial value - the rights for a share of the property insured, proportional to the ratio of the sum insured to the value insured.

Clause 270. Missing Vessel.

In case a vessel is missing, the Insurer shall be liable on the total sum insured.

A vessel shall be considered missing if no news about her has come within three months and, if said news could have been delayed due to war actions - within six months.

In accordance with the Contract concluded for a definite period of time, the Insurer shall be liable on the missing vessel if the last news of the vessel have been received before the term of the Contract expires, unless the Insurer proves that the vessel was lost (missing) after expiration of said term.

Clause 271. Abandonment.

The Insured may notify the Insurer of abandoning one's rights for all insured property (abandonment) and receive the total sum insured provided:

  1. the vessel is missing;
  2. it is economically non-expedient to renovate or repair the insured vessel;
  3. it is economically non-expedient to eliminate damage to insured cargo or to deliver said cargo to its destination;
  4. the vessel or cargo insured against seizure have been seized for more than two months.

An agreement of the Parties contradicting the rules of this Clause shall be invalid.

Clause 272. Notice of Abandonment.

A notice of abandonment shall be made to the Insurer within six months from the moment of expiration of the terms (advent of circumstances) indicate:' in Clauses 270 and 271 of this Clause.

On expiration of six months' term the Insured shall lose his right for abandonment but may still claim an indemnity of losses incurred on general grounds.

A notice of abandonment shall not be made by the Insured conditionally and shall not be waived.

An agreement of the Parties contradicting the rules of this Clause shall be invalid.

Clause 273. Cancellation of Abandonment.

If, after the Insured received an indemnity from the Insurer it becomes evident that the vessel had not been lost or if the seized vessel or cargo are set free, the Insurer shall have the right to demand that the Insured, having retained the property in question (Clause 270 and item 1 of Clause 271 of this Code), return the indemnity less the reimbursement for partial loss, if the Insured recognize said loss.

Clause 274. Insurer's Right with Respect to Third Parties.

On paying the indemnity, the Insurer shall acquire the right for a claim, within the limits of the sum paid, that the Insured (or the other party who has received the indemnity) has towards the party liable for the damages. Said right shall be exercised by the Insurer with observance of a procedure established for the party who has received said indemnity.

If the Insured refused his right to claim the party liable for the inflicted damage or exercising of said right became impossible by his own fault, the Insurer shall be free from an obligation to pay the indemnity in full or partially.

Clause 275. Presenting Proofs to Insurer.

In cases stipulated by clauses 269,271 and 274 of this Code, the Insured shall undertake to pass over to the Insurer all the documents and material evidence as well as inform the latter of all particulars and facts required for exercising the rights acquired by the Insurer.

Clause 276. Insured has received an indemnity from the third parties.

In case the Insured has received an indemnity from the third parties, the Insurer shall only pay the difference between the sum payable in accordance with the provisions of the Contract and the sum received from the third persons.