Goltsblat BLP advises that a loss recovery dispute with a constituent entity of the Russian Federation has been successfully completed


Legal Update No. 433, 19 September 2013

Goltsblat BLP has represented a major international insurance company that paid insurance indemnity to the owner of a building damaged by fire on a section of leading-in cables running from an electrical substation to the insured’s facility. The fire was triggered by breakdown of the Russian constituent entity's power grids (owing to insulation damaged as a result of heating and cooling by periodical power loads).

In the opinion of the Ministry for Property Relations of the respondent-region, the fire was caused by the copper cables, owned by the insured, operating in emergency conditions, as well as the replacement of transformers without a permit from the relevant authorities.

When preparing the case, Goltsblat BLP's lawyers collected documents relating to the ownership of the power grids, the boundaries of the power grids as recorded on the balance sheet and the person responsible for the condition of leading-in cables (the proper defendant in the case) and also obtained the requisite advice and opinions from expert fire safety engineers, which established a causal link between the defendant’s omissions and the consequences.

During the consideration of the case, and despite contradictory documents about the grid owner requested by the court from different entities, Goltsblat BLP's lawyers proved that it was the constituent entity that owned the cable line and that the fire had occurred on the cable section owned by the constituent entity.

Goltsblat BLP’s lawyers furnished the court with conclusive evidence that the owner was responsible for the grids’ condition and, consequently, the owner should compensate for losses caused, irrespective of any managing company being appointed and the grids being recorded on the balance sheet of a third party (a unitary entity in bankruptcy proceedings).
During more than a dozen court sessions, and despite the defendant's objections, Goltsblat BLP’s lawyers managed to persuade the court that the Russian region, being a business entity, was guilty of negligence in managing the property as a result of its failure to enter into a technical maintenance agreement in relation to the leading-in cables and it should compensate for losses caused by such negligence.

Dispute Resolution Partner Rustam Kurmaev, who led the team, commented on the court decision, "We are satisfied with the judicial act. Russian law enforcement practice does not, in general, tend to satisfy claims against the state and we are happy that, in our case, justice has triumphed."

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