Cargo insurance is widely used because of the high risks involved in transportation. However, having paid the indemnity for cargo loss or damage, insurers often face various problems in recovering subrogation claims. This update addresses some of the issues that arise in pursuit of such claims.
Not all insurers pay an insurance indemnity for cargo loss or damage only after receipt (from the insured or other beneficiary) of all the documents necessary to pursue a subrogation claim against the carrier or forwarding agent. Insurers commonly indemnify the insured or other beneficiary relatively soon after the insured event, before a properly formalised claim has been presented to the carrier or forwarder. In this situation the insurer is responsible for compliance with the pre-action claim procedure.
Having paid the indemnity, the insurer takes the place of the insured or other beneficiary in the relationship with the party responsible for the loss or damage. Therefore, until a subrogation claim is initiated in court, the insurer should comply with the pre-action claim procedure and all applicable limitation periods - which, in the case of claims arising from transportation and forwarding activities, are shorter than the three-year general time limit for claims.
Pre-action claims connected with transportation can be presented to the carrier at any time within the one-year limitation period. However, the Motor Transport Charter provides that a carrier must be given 30 days to consider a pre-action claim. This effectively reduces the period for initiating court action to less than 11 months. If the pre-action claim is presented to the carrier less than 30 days before the one-year time limit is due to expire, the court is highly likely to dismiss the claim without consideration, in which case the subrogated insurer loses its right to pursue its subrogated claim.
As for claims against forwarding agents, Article 12(4) of the Federal Law on Forwarding Activity provides that pre-action claims against a forwarding agent must be presented within six months of the day on which the right to claim arose.
One of the usual grounds on which forwarding agents reject an insurer's claim - and a common submission in statements of defence filed in court actions - is failure to comply with the pre-action claim procedure (ie, where the claimant has failed to present its claim to the forwarding agent within the six-month time limit set by Article 12). In such cases the forwarding agent usually seeks a ruling from the court that the claim be dismissed without consideration. However, uniform court practice has established that the six-month period does not prevent the filing of a claim in court.(1)
In addition to compliance with the time limits for the presentation of pre-action claims, it is also important to comply with the requirements for preparation of pre-action claims as stipulated by Article 12 of the law and Article 39 of the charter. At worst, violation of these requirements may result in a claim being dismissed without consideration.
Compliance with the pre-action claim procedure can be instrumental in securing an amicable settlement of claims with willing contractors, without having to resort to the courts. However, a breach of the official procedure may, at worst, provide grounds to have a claim dismissed without consideration, which is fatal if the time limit for the claim has expired.
Apart from failure to comply with pre-action time limits, the usual reasons for seeking dismissal of a claim without consideration or for defending a claim relate to failure to comply with pre-action procedures, whether based on:
- lack of power of attorney to sign a claim;
- failure to produce documents confirming the right to claim (for an insurer, these include proof of payment of the indemnity to the insured or other beneficiary);
- failure to produce documents which confirm that the insured or other beneficiary was the party which contracted with the carrier or forwarding agent;
- failure to produce documents confirming the quantity and cost of the cargo; or
- service of uncertified copies of documents.
The limitation period for claims in connection with transportation and forwarding activities is one year. Although the charters indicate that this period starts from the date of the event which gives rise to the claim, disputes over the point at which the limitation period began to run often arise in the course of the court's consideration of the claim.
Disputes concerning the start of the limitation period are more common in relation to forwarding activities, as Article 13 of the Law on Forwarding Activity provides that the period starts from the day on which a right to claim is discovered. The courts usually interpret this as meaning the day on which a party learned that its right had been violated.(2)
As insurers are aware, the limitation periods for subrogation claims are the limitation periods applicable to the original liability.
In considering the issue of timeframes for subrogation claims, it is important to remember that the applicable limitation period may be less than the general limitation period of three years under the Civil Code, and that the period may be further reduced by pre-action time limits.
For further information on this topic please contact Polina Kondratyuk at Clyde & Co (CIS) LLP by telephone (+7 495 728 99 55), fax (+7 495 926 49 40) or email ([email protected]).
(1) See, for example, Arbitrazh Court of Moscow, February 1 2011 in Case А40-121792/2010; the Federal Arbitrazh Court of the North-West District, January 28 2010, Case А56-16351/2009; 17th Arbitrazh Court of Appeal, January 15 2010, Case А60-24458/2009; Ninth Arbitrazh Court of Appeal, May 29 2009, Case А40-79757/08; Ninth Arbitrazh Court of Appeal, May 4 2008, Case А40-56211/07.
(2) See, for example, Federal Arbitrazh Court of Moscow Region, March 28 2012, Case А40-13259/11; Federal Arbitrazh Court of the North-West District, December 21 2011, Case А56-72930/2010; Federal Arbitrazh Court of the Ural District, April 20 2011, Case А60-20974/2010.