Insurance Company Directed to Settle Marine Insurer Claim

The National Consumer Dispute Redressal Commission on Tuesday (19th Feb 2013) directed an insurance Company to settle the remaining claim of the complainant after the marine insurer settled the complainant claim on his policy on the basis of “double insurance”. The Commission also awarded compensation to the complainant for causing mental agony and harassment.

The matter was Andagro United Services Ltd. v. United India Insurance Co. Ltd. (OP 1) and Central Warehousing Corporation (OP 2) in Original Petition No. 165 of 2000 wherein the complainant (Andagro) had imported sugar to India that was stored in the warehouse of OP2. The Complainant had 2 insurance cover for the imported good - the marine insurance and the insurance cover provided by OP2 through OP1. The Complainant paid the premium to OP2 for insurance cover that OP 2 provided for the stored goods.This premium was thereafter transferred by OP 2 to OP 1.

The imported goods were destroyed by a cyclone and thereby the complainant sought the insurance claim from OP 2. The complainant meanwhile took claim for the damaged goods from the marine insurer who considered the claim as “double insurance and paid 50 % of the policy. The remaining balance of the loss was to be claimed from OP1. The Complainant had earlier made the claim from OP2 and on insistence of OP 1 and 2 had given an undertaking not to claim from marine insurer. The OP 1 had also not fully disclosed the terms of insurance to the Complainant.

The dispute centred on the insurance claim. The complainant sought claim from OP1 and OP2 which they refused to settle. Thereafter, the matter came to the Commission. The Opposite Parties OP 1 and OP2 contended that the complainant was not a “consumer” and hence the complaint was not complaint within the meaning of the Act. The opposite parties also contended that the insurance policy was a fire policy and the contract was between the OP 1 and OP2 and the complainant was a stranger to the contract and could not claim from OP1. They also contended that though the goods were same but the subject matter of two policies was different. They also relied on clause 4 of the policy that excluded their liability in case of 2 insurance policies. OP 2 also contended that goods were destroyed by Act of god and even if he was the bailee of the goods there was no deficiency of services.

The Commission headed by Presiding Officer Justice J.M Malik rejected the contentions of the OP 1 and OP 2 and held that the Complainant was in fact a “consumer”. The commission observed that OP 2 obtained the policy from OP1 for the complainant and for others whose goods were stored in the warehouse and the complainant paid the premium for the insurance cover to OP 2 clearly indicating that the Complainant was a consumer.

The Commission also observed that the doctrine of privity of contract stood established between the Complainant and OP1 due to the agreement entered into between OP1 and OP 2 and thereby OP 1 is jointly and severally liable with OP 2 to the complainant. The Commission also observed that receipts and letters issued by OP2 to Clearing and Forwarding Agents declaring that Complainant goods insured with OP 1 were kept by it also indicates existence of privity of contract between the complainant and the OP 1. The Commission also observed that the suppression of relevant provisions of insurance policy, the missing representation and the admitted non-payment of the claim thus constituted deficiency in service on the part of OP1.

The commission also held that the "Doctrine of Contribution" is applicable to the case and OP1 was liable to pay to complainant the balance of the claim. The commission observed that the entire policy is required to be read holistically and the Opposite party cannot rely on the provision that favours it and is detriment to the complainant and thereby ignore the other provision. The Commission observed that clauses 11 and 3 of the insurance policy provides for contribution and as well as rate able proportion of loss and provides that it shall cover risk of cyclone respectively and thereby the said clauses shall prevail over the clause 4 that excludes opposite party liability.

The commission also observed that the complainant had acted in best interest of the OP to have sought insurance from the marine insurer and it was aimed to reduce the burden on OP 1. The Commission observed that under insurance law, the assured has the right to persuade both the insurers on the basis of equity because it has paid the premium to two insurers and thereby the two insurers must share the burden equally. The Commission held that the complainants are bound to claim in law, the rateable interest from both the policies.

The commission thus held in favour of the complainant and held that OP 1 was liable to pay the remaining balance of the loss that is 50 % of the loss with interest from the date of filing of complaint to the complainant and also directed OP 1 to pay compensation to the complainant for causing mental agony and harassment. However, the Commission held in respect of OP 2 that no liability could be fastened on it.