—— Dispute Over Shipbuilding Contract Between China Ping An Property Insurance Co., Ltd. Jiangsu Branch and Yangzhou Longhe Shipbuilding Co., Ltd.

Key Word： Force majeure; Sudden gale; Burden of proof; Wind-prevention measures; Subrogation claim 

Case Summary:

In August 2019, Yangzhou Longhe Shipbuilding Co., Ltd. (hereinafter referred to as "Longhe"), as the builder, and Hengfa Company, as the owner, entered into a "Shipbuilding Processing Order Contract" to commission the construction of the vessel "Hengfa 18." Hengfa Company had insured the ship construction  insurance at China Ping An Property Insurance Co., Ltd. Jiangsu Branch. In April 2021, the region where Longhe is located experienced severe winds, causing the overturning of the gantry crane onto the under-construction "Hengfa 18." This incident resulted in rope breakage and damage to the ship. China Ping An Property Insurance Co., Ltd. Jiangsu Branch filed a lawsuit with the Nanjing Maritime Court, seeking a judgment that Longhe should compensate for the loss of over CNY 650,000 and corresponding interest. Longhe argued that the incident in question, caused by a sudden and violent gust of wind, constituted force majeure and should be entirely exempt from compensation liability.

Judgment:

Upon examination, the court determined that whether accidents resulting from sudden natural disasters, such as severe winds, could be accurately foreseen and thus be deemed as force majeure should be assessed based on the general foreseeability capacity of ordinary people. This assessment should also consider weather forecasts, actual wind force, and the measures that the parties could take. In this case, although the parties could foresee the severe wind on the day based on the weather forecast, but the subsequent occurrence of a wind force exceeding the maximum value predicted in the forecast was still unforeseeable. Longhe had taken measures that could prevent ordinary strong winds, yet the accident occurred, causing damage. In such a situation, where no other breach or fault existed, it should be determined that the objective circumstances were unavoidable and insurmountable. Therefore, Longhe's compensation liability should be entirely exempted. Based on this, the court lawfully rejected all of China Ping An Property Insurance Co., Ltd. Jiangsu Branch's claims. After the judgment, neither party appealed.

Significance:

Jiangsu's shipbuilding enterprises，located in the middle and lower reaches of the Yangtze River, are often affected by the environment and climate，sudden strong winds in summer have caused damage to ships built in shipyards. In judicial practice, as weather forecasts become increasingly precise, it becomes more difficult for shipbuilding companies to prove the unforeseeability of accidents caused by invoking force majeure. Additionally, disputes often arise regarding the extent of foreseeability, the allocation of the burden of proof, and other practical issues. This case is a typical case of invoking force majeure to claim exemption from liability. During the trial, the court affirmed that the foreseeability of accidents caused by strong winds should be determined based on the cognitive capacity of an ordinary person. This reasonably allocation of the burden of proof helps to establish that shipbuilding companies can be deemed to have encountered force majeure when they can prove that they have taken reasonable and prudent wind prevention measures and yet the accident could not be avoided. This resolution effectively mitigates the systemic operational risks that natural disasters might pose to shipbuilding enterprises, protects the legitimate rights and interests of shipbuilding companies in accordance with the law, and serves as a regulatory example for handling such cases.