HIGHER PEOPLE??S COURT OF ZHEJIANG  PROVINC 

PEOPLE??S COURT OF CHINA 

CIVIL JUDGMENT


             No. (2001)Z.J.E.Z.Zi. 105??2001

Appellant(Defendant in the first instance  trial): China Pacific Insurance Corporation, Hangzhou Branch;

Domicile: No.196, Qingchun Road, Hangzhou, Zhejiang Province.

Legal Representative: Lu An??ping, General manager of the corporation.

Agent ad litem(specially authorized): Cai Cunqiang, Lawyer from Shanghai Municipal Huali Lawyers Office.


Appellee: (plaintiff in the first instance trial): Ying Zhilong, male, born on October 18, 1969, Han Nationality, seaman, residing at No. 29, Renmin Road, Shangyu City, Zhejiang Province.

Agent ad litem (specially authorized) Yu Zhihong,

Lawyer from Zhejiang Zeda Lawyers Office.


The appellant, China Pacific Insurance Corporation Hangzhou Branch refused to comply with the Civil Judgment No. Y.H.S.C.Zi. 164??(2001) issued by Ningbo Admiralty Court, and filed an appeal to this court. This court accepted the appeal and a collegial bench was duly formed. On November 5, 2001, this court held a public hearing of the case. Cai Cunqiang, the agent ad litem of the appellant (China Pacific Insurance Corporation Hangzhou Branch) and Yu Zhihong,Ying Zhilong??s agent ad litem were both present in the court. The cases has now been concluded.


The trial of first instance decided: ?°Zheshaohai 3?± belonged to Ying Zhilong, with a loading capacity of 575 tons and a valid certificate for a term November 8, 2000 to November 2, 2001. Ying Zhilong insured it on ?°all risks?± term (Term 96.11.1) on November 15, 2000 at China Pacific Insurance Corporation Hangzhou Branch (hereinafter referred to as Taibao Hangzhou Branch) and both the insurance value and insured amount reached RMB 900,000.00 yuan. The insurance fee was RMB 9,000.00 yuan, with an insurance period from November 16, 2000 to November 15, 2001. The first article in the «Coastal??Inland River Ships Insurance Articles» of November 1, 1996 stipulated that damage from capsizing and sinking of the ship caused by running aground will be borne by the insurance company; and the third article stipulated that all losses, liabilities and expenses caused by the un-seaworthiness of the ship will not be borne by the insurance company. ?°Zheshaohai 3?± shipped 139 cases of glass products of Xiaoshan Municipal Huaxing Construction Materials Co., LTD  ( shipment contract indicated 560 tons, consignment note marked 575 tons and the actual weight was 557.3 tons) from Xiaoshan Shimen Port to Fuzhou Harbor on March 6, 2001. When it sailed to the second work-section of the opposite riverside of the entrance to Qiantang River, on March 8, restrained by the water level for sailing out of the port, it was decided to drop anchor and to sail on March 10 after the passing of the tide. At 0200 of March 10, the ship weighed anchor??under the influence of the movement of river water, the front part of the ship declined to the right and led to the running aground of the ship. Later, affected by the movement of river water, the ship quickly sank. The Accident Liability Identification provided by the port supervision authority indicated that the bad fairway conditions, too much movement of the river water, and ineffective protective measures were regarded as the causes of the accident. After the accident, Ying Zhilong asked Taibao Hangzhou Branch to pay insurance compensation. Taibao Hangzhou Branch surveyed and calculated that the actual glass weight loaded by ?°Zheshaohai 3?± was 578.1 tons, on the basis of the loading bill and weight, as well as the size of the packing shelves provided by Zhebo Sales Department of Guangyu Conglomerate Marketing Management Corporation. Then, Hangzhou Branch entrusted Zhejiang Provincial Ship Survey Bureau to analyze the seaworthiness of the ship and causes of sinking on the basis of the ship stability calculation, the stowage and packing conditions of the cargo in ?°Zheshaohai 3?±. On April 9, the bureau stated in the analysis report that as the cargo on board raised the center of gravity of the ship, the stability of the ship did not meet the stipulated requirements in pertinent laws and rules, and the ship was in a state of un-seaworthiness. When the ship was running aground??under the influence of movement of river water, the restoring moment couldn??t resist the turnover moment??which caused the sinking of the ship. On April 10, Taibao Hangzhou Branch notified Ying Zhilong of their not paying the insurance compensation because the sinking of the ship was within the scope of excluded liability, as stated in the insurance clauses.On June 4, having known of the actual weight of the cargo being 557.3 tons, Taibao Hangzhou Branch entrusted Zhejiang Provincial Ship Survey Bureau once more to survey the stability of ?°Zheshaohai 3?± and conclusion was reached that the integrate stability of ?°Zheshaohai 3?± could not meet the requirements for cargo ships operating in coastal sailing areas under «Examination Regulations for Ships and Maritime Facilities».


The first instance court considered that the relationship between both parties concerning the insurance was valid and effective. The fact of the case was clear. Although the loaded weight of cargo was 557.3 tons -less than 575 tons, but improper stowage caused the raising of the center of gravity of the ship, so the ship could not meet the required stability  requirements stipulated in the relevant laws, and was in a state of being not suitable for sailing. When the ship ran aground under the influence of the transverse stream, the ship??s restoring moment couldn??t resist the turnover moment of stream??which caused the ship to decline in the way of the movement of the river water. The case came under one of the articles of excluded liability clause in the overleaf clauses of the insurance policy. Under normal conditions, Taibao Hangzhou Branch wouldn??t undertake the compensation liability according to the said reasons. However, Article No. 17 of the «Insurance Law» of the People??s Republic of China stipulates that if the insurance contract includes the article excluding the insurer??s liability, the insurer should clearly explain the article to the insured before signing the contract. Without this clear explanation, the article is not valid. The insurance policy used by Taibao Hangzhou Branch did not distinguish ?°time polity?± from ?°voyage policy?±. Moreover, the Excluded liability articles in the overleaf clauses of the insurance policy were stricter than the stipulations in Article No.144.1.1 of the «Maritime Code of the People??s Republic of China?·which reads: un-seaworthiness of the ship at the time of the commencement of the voyage unless  where under a time policy the insured has no knowledge thereof ,which means the grounding and sinking of the insured ship was not within the scope of the exclusion clause of the policy. As Ying Zhilong entered his ship (for insurance) in Taibao Hangzhou Branch, the latter should have explained this article to Ying Zhilong, but Hangzhou Branch could not show sufficient evidence to prove its fulfilling the obligation for explanation to Ying Zhilong, nor had it sufficient evidence to prove that Yang Zhilong was aware of the un-seaworthy situation of the ship. The excluded liability article in the overleaf clauses of the insurance policy was therefore invalidated hereby, and Hangzhou Branch??s reasons for refusal were considered not sufficient. Ying Zhilong was reasonable in his argument and should be given support. According to Article No.17 of the «Insurance Law of the People??s Republic of China», Article No. 244.1.1, and Articles No. 237 and No. 238 of the «Maritime Code of the People??s Republic of China», and Article No. 64.1 of the «Civil Procedure Law of the People??s Republic of China», the court of first instance decided on July 24th ,2001 that Hangzhou Branch should pay Ying Zhilong  RMB 900,000.00 yuan as compensation for his loss, plus corresponding bank interest (from April 10, 2001 to the date when the judgment is made)within ten days of the day on which this judgment become effective. The RMB14,010.00 yuan acceptance fee shall be borne by Taibao Hangzhou Branch.


After the ruling, Taibao Hangzhou Branch did not comply with the judgment and appealed to this court, alleging that the ship ?°Zheshaohai 3?± was in a state of unseaworthiness before sailing, which led to the sinking of the ship. This was an incontestable fact. Hangzhou Branch also contested that as the owner and acting as the mate and second mate of the ship, the insured should know the ship was in a state of un-seaworthiness. The appellant said that he explained the insurance clauses especially the excluded liability clause in detail, and fulfilled the obligation of explanation stipulated in Article No. 17 of the «Insurance Law». So, Taibao Hangzhou Branch asked the secunda instancia court to rectify the judgment of first instance trial and rebuke Ying Zhilong??s litigation. 


Appellee Ying Zhilong rejoined in writing and in court trial that the appellant did not undertake the obligation of explanation  of the excluded liability clause in the policy; the insurance policy under this case was a time policy. Although the insured was a deck officer of the ship, his post was only a second mate of the ?°Zheshaohai 3?±, and was not responsible for the optimum arrangement of cargo. Even the mate undertaking the responsibility of cargo stowage couldn??t make a stability calculation as the expert ship surveyor did, and couldn??t be aware of the fact that the cargo on deck caused the ship??s stability being not in conformity with the prescribed standard. So, the appellant should still undertake the liability for compensation. 


In the process of the second instance trial, both the appellant and the appellee provided new evidence. The appellant??s new evidence included: 

??) The appellant??s investigation notes respecting Captain Yi Tiangan, Mate Zhan Disheng, Chief Engeneer Ying Jiafu, and Boatswain Jin Jiming . In the notes it was stated that when the accident happened, Ying Zhilong served as second mate and there were 10 pieces of cargo on deck. However, the actual number was 23, which proved that the statement of the crew regarding the stowage of cargo was untrue, and it also proved that the crew knew the ship was in a state of  unseaworthiness.

??) Letter of reply by Zhejiang Maritime Affairs Bureau regarding the Outlines of Examinations used by Ying Zhilong and Zhan Disheng, and the excerpts from the «Examination Outlines for Captains and Deck Officers of the People??s Republic of China»?±, to prove that a mate has the obligation to calculate the dynamic stability of the ship. The Appellee agreed to evidence No. 2, and was not sure whether evidence No. 1 was in conformity with what the crew stated, but did not provide contrary evidence against it. The Appellee provided the certificate of ownership of ?°Zheshaohai 3?±,showing that the co -owners Ying Zhilong and Zhan Disheng respectively held a 50 per-cent share of the ship, which was agreed by the appellant. This court approved all the said evidence and the confirmation of the evidence by the court of first instance. 


In the light of the above facts, this court held that ?°Zheshaohai 3?± was owned by Ying Zhilong and Zhan Disheng,where Zhan Dingsheng acted as the mate and Ying Zhilong acted as the second mate; other facts being in conformity with the judgment of the first instance trial.


This court held that the appellant issued and signed an insurance policy on November 15, 2000 which did not indicate whether it was a time policy or a voyage policy,  but the insurance term stipulated in the policy was one year, which was far longer than the reasonable term needed for a single coastal or inland river voyage, so it could be regarded as a time policy. The ship insurance policy signed by the appellant and the Appellee was lawful and valid. Before the voyage of the ?°Zheshaohai 3?±, since the cargo on deck caused the raising of center of gravity of the ship, and the ship??s restoring moment couldn??t resist the turnover moment brought by the transverse stream, and so the case came under the scope of the excluded liability Clause as stated in the overleaf of the insurance policy, i.e. the ship was in a state of un-seaworthiness. According to Article No.17 of the «Insurance Law» of China (i.e. in a contract which includes an insurer??s excluded liability clause), the appellant (insurer) should clearly explain the clause to the insured. Without a clear explanation, the article is not valid. As the appellant couldn??t provide evidence to prove that he had clearly explained the clause to the Appellee, so the excluded liability clause in the insurance policy could not be valid and wouldn??t be legally binding. The reason for appeal - having performed the explanation obligation - presented by the appellant could not be supported by this court. In the light of Article No. 244 of the Maritime Code of China that under a time policy, unless otherwise agreed in insurance contract or the insured had no knowledge thereof, the insurer shall not be liable for the loss or damage arising from the un-seaworthiness of the ship insured. In this case, though the insurer couldn??t ask for exemption from liability according to the excluded liability clause ,yet the insurer could still ask for the relief from liability in accordance with the relevant exception clauses provided for in the Maritime Code of the PRC . In the light of the overleaf clause No. 19 of the insurance policy,  as one of the ship owners enjoying the insurance benefits and acting as the mate,  Zhan Disheng,the insured, and the captain of the ship should both undertake the obligations of ensuring the ship??s seaworthiness; Before sailing of ?°Zheshaohai 3?±, as a second mate and being on the ship, the insured should clearly know there were 23 pieces of cargo on deck. And, in common sense,  loading cargo on deck could influence the ship??s stability and render the ship unsuitable for sailing. In this case, no evidence had been provided to prove that as one of the ship owners, the mate fulfilled the duty of calculating the ship??s dynamic stability, nor was there any evidence to prove that the insured had demanded the captain and mate to calculate the ship??s stability, nor evidence to prove that the insured had execised due diligence to make the ship seaworthy. 

After the accident, the crew gave a false statement regarding the cargo on deck, which also proved that both the captain and the crew clearly knew that cargo on deck was enough to influence the ship??s stability. So, this court held that the insured clearly knew the ship was un-seaworthy at the beginning of the voyage. The insured did not fulfill their contract obligations, which led to the accident. After the accident, under the pretext of not knowing the ship was in a state of un-seaworthiness, the insured asked not to release the insurer from his liability for compensation/This was not in conformity with the principle of utmost good faith and couldn??t be supported by this court. According to the said statement, the insurer??s appeal that the ?°Zheshaohai 3?± was in a state of un-seaworthiness, a fact which the insured should clearly know, so the appellant could not undertake the liability for compensation was an argument which carried weight.What was held in the judgment of first instance that the appellant did not know the ship was in a state of un-seaworthiness  was wrong in fact and inappropriate in substance, so it needed to be rectified. According to Article 153.3.1 of the «Civil Procedure Law of the People??s Republic of China», Article 17 of the «Insurance Law of the People??s Republic of China», and Article No. 244.1.1 of the «Maritime Code of People??s Republic of China», the judgment is entered as follows:


 1. Civil Judgment No. Y.H.S.C.Zi.164 (2001) issued by the Ningbo Admiralty Court is hereby dismissed.

 2. Appellee Ying Zhilong??s appeal request is dismissed.


The acceptance fees for first and second instances of RMB14,010.00 yuan shall be borne by the Appellee Ying Zhilong.


This judgment is final.




             Presiding  Judge: Zhou Ping

            Deputy Judge: Fu Zhichao

Deputy Judge: Bao Ruyuan

 

Zhejiang Provincial Higher People??s Court(seal)

December 5, 2001


Certificated true copy


Clerk: Gao Yilong