NEXT OF KIN: RELATIVE, FRIEND OR LEGAL HEIR?

Everyone who at least once carefully read an Individual Employment Contract of the seafarer recalls a special line marked “next of kin”, which should be filed by the seafarer during signing of the Contract before the voyage. Leading shipping companies, for example, Marlow Navigation, Mediterranean Shipping Company or CMA CGM ask seafarers to file special document called “Next of Kin Declaration”, which shall be an integral part of the Employment Contract. However, as we can see from the practice of resolving insurance accidents, the seafarers are not aware about the nature of this definition. Moreover, sometimes even shipowners (as employers) do not fully understand who is “next of kin”. In this article I will try to understand the legal status of this concept, the practice of its use in Ukraine and abroad and to formulate certain universal advices to shipowners, which should be helpful while examination of claims for payment of contractual compensations caused by loss of life of the seafarer.

Next of kin: the closest relative or nominated beneficiary?

The Law Dictionary (Seventh Edition) by Steven H. Gifis, Former Associate Professor of Law Rutgers, The State University of New Jersey, provides the following definition of the “next of kin”: the term is used generally with two meanings: (1) nearest blood relations according to the law of consanguinity and (2) those entitled to take under statutory distribution of intestates’ estates. In the latter case, the term is not necessarily confined to relatives by blood, but may include a relationship existing by reason of marriage, and may well embrace persons, who in the natural sense of word, bear no relation of kinship at all¹. I believe that for the second meaning of this definition explained in Gifis law dictionary the best Ukrainian corresponding definition will be “nominated beneficiary” (ukr. “pryznachenyi vyhodonabuvach” or “pryznachenyi benefiziar”), which best reflects the nature and functions of this term in the individual employment contracts of the seafarers.

Does “next of kin” exist in Ukrainian legislation?

I have been asked this question several times both from my clients (shipowners, P&I clubs, crewing agencies) and Ukrainian judges while examination of the cases on recovering contractual compensations caused by death of Seafarers during employment period. And there is no clear-cut answer to that question.

From one side, Ukrainian Civil Code (hereinafter “the Civil Code”) provides file successive heirs at law (please refer to the articles 1261-1265 of the Civil Code). Please be reminded that fifth line of heirs include “other relatives of the testator up and including the sixth degree of kinship, in this case relatives of the closest degree of kinship deprive relatives of the far degree from the right of inheritance. The degree of kinship shall be determined by the number of births that separate the relative from the testator. The testator’s own birth is not included in this number. Is it not possible to figuratively call the heirs of the fifth order “next of kin” when there are no heirs of earlier orders left?

From another side, the Civil Code provides exclusions from the common rules of inheritance at law. For example, according to part 2 of the art. 1229 of the Civil Code, if the insured in the insurance contract has appointed a person, who shall receive a right for insurance claim in case of death of the insured, such right should not be included into inheritance. In this context I would like to remind you that before adoption of the new Insurance Law in November 2021 this provision of the Civil Code had slightly different look. In particular, it had a reference precisely to the “personal insurance agreement” and not to any “insurance agreement”. In the context of the Insurance Law valid in November 2021, “personal insurance agreement” meant the life insurance policy. Article 3 of the Insurance Law (2021) directly provided for the right of the insured while execution of the life insurance policy to nominate the beneficiary for receiving insurance remunerations and to change such beneficiary before occurrence of the insurance event. The valid wording of the part 2 of the art. 1229 of the Civil Code provides for the possibility of the insured to nominate the beneficiary under any insurance agreement, including life insurance policy. Therefore, in this context the definition “nominated beneficiary” means any person, irrespective of existence of the family (blood) relationships with the insured.

However, it is widely recognized that seafarers do not execute the life insurance agreements, because this is the undertaking of the shipowner according to the Maritime Labour Convention of 2006. The shipowner of each vessel shall have a valid insurance of liability before third parties (P&I Certificate), which is usually issued either by P&I Club, insurance company or insurance broker acting on behalf of insurer. The P&I cover necessarily includes the risks of death, personal injury or illness of crewmembers during their employment on board. Therefore, any seafarer shall be automatically qualified as insured person under the relevant P&I policy hold by the shipowner.

Some of my fellow lawyers believe that while execution of the individual employment contract with the shipowner and nominating the beneficiary (next of kin) the seafarer simultaneously become a party (co-party) to the liability insurance agreement, which is signed by the shipowner, and therefore suggest to use in these cases part 2 of the art. 1229 of the Civil Code. Other colleagues appeal to the art. 636 of the Civil Code (“Agreement in Favor of Third Party”) determining the individual insurance agreement of the seafarer as agreement in favor of third party, where a nominated beneficiary acts as such “third party”.

From my point of view, the best correspondent definition of the “next of kin” as nominated beneficiary is aforesaid part 2 of the art. 1229 of the Civil Code, which could be used here following the principle of analogy of law (art. 8 of the Civil Code) as the closest (similar) civil relationships. A similar approach is used by Ukrainian courts, which is confirmed by below examples from the court practice.

Yuliia Zosiak vs. Percula Shipping & Trading Inc. (Case No. 520/960/19)

In the case No. 520/960/19, which has been under examination for more than 3 years, the courts had to resolve the dispute between nominated beneficiary (next of kin) and heirs at law on payment of contractual compensation caused by death of the seafarer, who was employed as Chief Engineer on board of m/v “Achilleas S” and died in the Indian hospital. Mrs. Yuliia Zosiak, acting as Claimant within this case, was a daughter of the deceased Seafarer and the only heir at law. She demanded the outstanding salary of the Seafarer and loss of life compensation. The court has discovered that Individual Employment Contract of the Seafarer contained a “next of kin” line, whereby the Seafarer has nominated another person. Nevertheless, the first instance court has satisfied the claim and pointed out that Claimant (daughter of the deceased seafarer) is the legal heir of first line. The Appeal Court disagreed with such conclusion, cancelled the judgement of the first instance court and adopted new judgement, whereby declined the claim in full. The Supreme Court while revising the resolution of the Appeal Court has pointed out the following. According to the art. 985 of the Civil Code, while execution of the insurance agreement the insured shall be entitled to appoint an individual or a legal entity for receiving the insurance compensation (nominated beneficiary), and to change such nominated beneficiary before occurrence of the insurance event, unless otherwise is provided by the insurance agreement. According to the art. 1229 of the Civil Code, insurance payments (insurance compensation) shall be inherited on a common basis. If the insured in the personal insurance agreement has appointed a nominated beneficiary for receiving insurance compensation in case of his/her death, such right should be excluded from inheritance. Therefore, insurance compensations shall be included into inheritance and shall be inherited on a common basis only if a seafarer does not appoint a nominated beneficiary (a person for receiving insurance compensation). As it comes from the Individual Employment Contract, in case of Seafarer’s death on board of the vessel, the shipowner shall pay a loss of life compensation to the next of kin. A wife of the Seafarer has been nominated as next of kin under the employment contract. Therefore, Supreme Court decided to remain the resolution of the Appeal Court unchanged and dismissed cassation claim of the daughter of the deceased Seafarer.

In this case deserves attention the Resolution of Odesa Appeal Court dated 29.09.2020, where the Appeal Court has pointed out the following: “As it comes from the case materials, the next of kin appointed by the Seafarer in the contract dated 05.02.2018 is Seafarer’s wife (N.O.) with indicating her telephone number. Next of kin is a beneficiary under the insurance agreement (art. 3 of the Insurance Law of Ukraine, art. 985 of the Civil Code of Ukraine)”. Therefore, in this case the Supreme Court has agreed with position of the Appeal Court on legal status of the “next of kin” as nominated beneficiary and also referred to the articles 985 and 1229 of the Civil Code for the disputed relationships.

Nadiia Kostynyuk vs. Lemisoller Shipmanagement Ltd & others (Case №522/1150/18)

In the case No. 522/1150/18, which has been examined for two years, Mrs. Nadiia Kostynyuk, a wife of the Seafarer, acted as Claimant. In her court claim she demanded, inter alia, loss of life compensation caused by death of her husband who was employed on board of m/v “Victoria May” as Electric Engineer and died on board of the vessel from the heart attack. In this case the Individual Employment Contract referred to the Collective Agreement, which, in turn, provided that contractual compensation for the loss of life shall be paid in favour of the nominated beneficiary (next of kin) and if a seafarer left no nominated beneficiary – to the person or body empowered by law or otherwise to manage the estate of the deceased seafarer. In this case the Seafarer has appointed his wife as a “next of kin”, who acted as the Claimant.

In the Judgement of the first instance court, which has been set out on 35 (!) pages the court gives a detailed interpretation of the concept of the “next of kin” using definitions of “next of kin” and “nominated beneficiary” as synonyms, without reference to provisions of the art. 985 and 1229 of the Civil Code. Also in this case it’s worth to note court’s reference to the Expert Opinion under the Cyprus law because m/v “Victoria May” was flying Cyprus flag and therefore, following the articles 91-92 of UNCLOS Convention, the vessel falls under the jurisdiction of Cyprus. Also, in this case the court made an accurate assessment of the nature of loss of life compensation having said that it is not an instrument of compensation of damage caused by death of the victim and is not regulated by the tort laws. Right to claim a loss of life compensation arising from the Collective Agreement, it has contractual nature and therefore shall be regulated by contractual laws. It is confirmed by the special reference in the CBA that compensation shall be paid to the particular beneficiary and not to the person who suffered the damage due to death of the Seafarer.

Elvira Ilina vs. Andriaki Shipping Co Ltd (Case №522/3586/20)

In this case the Claimant – Elvira Ilina – started a court proceeding against the shipowner (Andriaki Shipping Co Ltd), its P&I Insurer (UK P&I Club) and National University “Odesa Maritime Academy”. She claimed loss of life compensation caused by death of her husband, who was employed as Electric Engineer on m/v “Militos” and died in the medical clinic in Piraeus on 07.12.2016. The Claimant substantiated its claims by referring to the art. 1200 of the Civil Code, which provides the entitlement of disabled persons, who were dependents of the deceased as well as his children to compensation of caused damage. The Defendants asked the court to decline the claim in full with reference to the Receipt & Release Statement signed by the Claimant on 16.11.2017, whereby she granted her consent to receive contractual compensation in the amount of USD 96 909 as full and final settlement of all claims related to the death of her husband. That Statement has been executed by the Claimant as the next of kin of the deceased Seafarer in the presence of witnesses. In dismissing the claim, the court has provided comprehensive legal assessment of the Receipt & Release Statement as a unilateral legal deed, and additionally pointed out that submission a court claim by the Claimant after receipt of USD 96909 shall be qualified as violation of the principle of prohibition of inconsistent behaviour and art. 3 of the Civil Code, which is an independent basis for dismissal the claim. We would like to add that signing of so-called “Receipt & Release Statement” by the nominated beneficiary (next of kin) is a common practice around the world, which allows the shipowner and its insurer to get legally binding document (in fact – a unilateral legal deed), which shall be enough legal ground for payment of contractual compensation.

And what is the opinion of the International Transport Workers Federation?

The International Transport Workers Federation (“ITF”) has drafted and updates from time-to-time sample forms of the Collective Bargaining Agreements², which are an integral part of the individual employment contracts of the seafarers employed with shipowners, who signed relevant agreements with Trade Unions affiliated with ITF. On 10^th of October 2023 ITF has published updated Collective Agreement ITF-IMEC IBF, which should be used in 2024-2025 (hereinafter “CBA”). In the CBA, which is executed in English, you can find both definitions: “next of kin” and “nominated beneficiary”. But are these concepts different in meaning? Let’s try to figure out.

10 жовтня 2023 року ITF опублікувала оновлену Колективну угоду ITF–IMEC IBF, яка застосовуватиметься протягом 2024-2025 років (далі – «Колективна угода»). В тексті Колективної угоди, яка викладена англійською мовою, зустрічаються як поняття “next of kin”, так і поняття “nominated beneficiary”. Але чи відрізняються ці поняття за змістом, виходячи з контексту? Спробуємо з’ясувати.

Firstly, according to the art. 18 (“Crew’s Effects”), the Company shall take measures for safeguarding property left on board by sick, injured or deceased seafarers and for returning it to them or to their next of kin. Art. 18 (“Termination of Employment”) provides that a seafarer may terminate employment when during the course of a voyage it is confirmed that the spouse, partner (when nominated by the seafarer as the next of kin), parent or dependent child has fallen dangerously ill or died.

Article 26 (“Loss of Life – Death in Service”) stipulates that if a seafarer dies through any cause whilst in the employment of the Company including death from natural causes and death occurring whilst travelling to and from the vessel, or as a result of marine or other similar peril, but excluding death due to wilful acts, the Company shall pay the sums specified in the attached Annex 3 to a nominated beneficiary and to each dependent child up to a maximum of four under the age of 18. If the seafarer shall leave no nominated beneficiary, the aforementioned sum shall be paid to the person or body empowered by law or otherwise to administer the estate of the seafarer.

Finally, in the Annex 3 to the CBA, which refers to the amounts of loss of life compensations, there is clear reference to the “nominated beneficiary”, not to “next of kin”. In these circumstances, we can conclude that in the text of the CBA definitions “next of kin” and “nominated beneficiary” used as synonyms and CBA does not provide for any qualification criteria for the nominated beneficiary (like existence or absence of relationships with the deceased seafarer). Absolutely identical approach regarding using of definitions “next of kin” and “nominated beneficiary” could be found in another sample form of ITF – Total Crew Cost (“TCC”).

Proper identification of the “next of kin” as conflict preventer

Neither ITF Collective Agreements nor Maritime Labour Convention 2006 provide for the special requirements for identification of the nominated beneficiary for receiving contractual compensation in case of seafarer’s death. However, according to our professional experience, shipowners and crewing agencies prefer to limit personal data of the beneficiary with his/her name and surname, sometimes adding mobile phone. It should be noted that such information is not enough for proper identification of the nominated beneficiary and sometimes led to conflicts with other legal heirs claiming contractual compensation because it is not possible to clarify who exactly has been appointed by the seafarer. For the avoidance of such situations, we strongly recommend to shipowners and crewing managers in addition to name and surname to indicate his/her date of birth and residential address of the nominated beneficiary (next of kin). We also consider it unnecessary and inappropriate to insert into the employment contract or next of kin declaration (“NOK Declaration”) a line “relationship”, because as we have clarified earlier, any individual could be appointed as next of kin, whether or not he/she has relationships with a seafarer.

Finally, shipowners and crewing managers shall regularly explain to the seafarers legal consequences of appointment of the “next of kin” in case of seafarer’s death. In this regard, it should be recognized as good practice when a seafarer signs two documents: “Next of Kin Declaration” and “Family Members Declaration”. Such approach is rational because it allows to delineate family members of the seafarer and nominated beneficiary, which may or may not be the same as one of family members. We sincerely hope that advices incorporated in this article will help both shipowners and the seafarers to better understand the nature of the “next of kin” definition and improve the practice of its use in the seafarer’s employment contracts.