In my last article, ‘Unravelling the Implications of Estopel and Waiver in Claims Settlement,’ published in the August issue of ‘The Insurance Times’ under the caption ‘Insurance Demystified,’I mentioned that I would discuss the case of Galada Power and Telecommunication Ltd. vs. United India Insurance Co.Ltd. (C.A.No.8884-8900 of 2010) in the context of Waiver and Estoppel.
Background of the above case:-
Galada Power and Telecommunication took a marine ( transit) policy from United Insurance Co. Ltd, vide Policy No.050202/21/26/16/2101/97. There was a shortage/loss of ‘All Aluminum Alloy Conductor’ (for short, ‘AAAC’) wire, which the Galada Power supplied to the Power Grid Corporation of India Limited (PGCIL). Galdada Power filed a claim of Rs 35 lakh against the insurance company on April 3, 1998. Based on the intimation, the Insurer appointed a surveyor who submitted his report on 1st September 1998, assessing the loss at approximately Rs. 2 lakhs in each case, totalling Rs. 43 lakhs.
United India Co.Ltd repudiated the claim on 20th September,1999, stating that ‘On perusal of the records pertaining to the above claim, and subsequent investigation into the matter, we find that the above claim lodged by you does not fall under the purview of “TRANSIT LOSS”. As such, the claim is not tenable under the terms of the policy. In view of this, we are treating your above claim as “NO CLAIM’.
The claimant’s case before the Consumer Disputes Redressal Forum, Ranga Reddy District, involved a dispute between a period 1.3.1998 and 13.4.1998, during which twenty-one trucks of AAAC wire, packed in wooden drums, were delivered to the PGCIL stores in Assam. PGCIL noticed transit losses in all trucks on March 25, 1998. The District Forum refused to entertain the claims for three reasons: the absence of non-joinder of necessary parties, the lack of proof of suspected theft, and the factual dispute not being decided in the summary proceedings. Disgruntled by the above decision, the claimant preferred an appeal before the State Commission, i.e., the Andhra Pradesh Consumer Disputes Redressal Commission. The State Commission, after reviewing the documents presented to it, concluded that the investigator’s report could not be trusted, as it was completed six months after the date of occurrence and was not based on any material worthy of verification. It may be recalled that the investigator’s report formed the basis for rejecting the claim, as stated in the repudiation letter. The Commission relied on the surveyor’s report, which was based on physical verification of the consignment and cross-examination of various documents, including the driver’s endorsement at the destination point, confirming the shortage on 25.04.1998. The Commission held that the Insurer’s repudiation of the claim was unjustified and concluded that there was no undue delay in notifying the insurance company of the claim. The State Commission determined the compensation ( as per the survey report)to be approximately Rs. 43 lacs and made the Insurer and the carrier jointly and severally liable.
The aggrieved Insurer and the carrier filed independent revisions before the National Commission. The revision of the carrier was rejected because it was not challenged. The Insurer sought twenty-one revisions. The National Commission dismissed four revisions vide judgment order dated 6th March,2009, as these transactions pertained to open delivery. The remaining seventeen revisions were due to the non-intimation of the claim to the Insurer within the stipulated timeframe, i.e., within seven days of the vehicle’s arrival at the destination mentioned in the policy.
The National Commission noted that the delivery dates were a crucial consideration for them. The Commission stated, based on the record placed before it, that the first intimation of the claim or loss was reported to the Insurer only on March 27, 1998, which was later confirmed by a letter dated April 3, 1998. The National Commission observed that there was no disagreement regarding the arrival dates of the different consignments in question, from March 1, 1998, to April 11, 1998. Considering this, the National Commission, alluding to Policy Condition 5 of the Inland Transit Clause, held that no policy cover existed and the risk remained uncovered after delivery of the goods to the consignee. The Commission also observed that the non-reporting of claims within the stipulated time deprived the insurer of a first-hand assessment of the loss. In the process, it set aside the orders of the State Commission.
The senior counsel of the insurer argued before the apex court that the view expressed by the National Commission that the claim was untenable due to the delayed intimation as mentioned in clause no. 5, of the policy is not maintainable, since a survey was conducted and in addition, the letter of repudiation didn’t refer to or even distantly touched upon any of the aspects enumerated in clause 5.
The senior counsel, in a subtle manner, referred to the Waiver and the Lacunae in the repudiation letter.
Observation of the Supreme Court –
The Supreme Court observed that the National Commission made its decision based on Clause 5 (Duration Clause) and, on that basis, rejected the claim by placing the blame on the complainant. The letter of repudiation dated September 20, 1999, didn’t mention a single word regarding delay or the duration clause. The letter of repudiation stated that the claim lodged by the complainant did not fall under the purview of transit loss, as indicated by the subsequent investigation report.
The Court further observed that it was evident the insurer had taken cognisance of the communication made by the appellant and nominated a surveyor to verify the loss. Once the insurer has undertaken the said exercise, the Court was inclined to think that the insurer could not have been allowed to take a stand that the claim is hit by the clause about duration. The Court categorically mentioned,
‘In the absence of any mention in the letter of repudiation and also from the conduct of the insurer in appointing a surveyor, it can safely be concluded that the insurer had waived the right which was in its favour under the duration clause’.
The Court alluded to a decision of the High Court of Delhi in Krishna Wanti v. Life Insurance Corporation of India, wherein ‘the High Court noted that if the letter of repudiation did not mention an aspect, it could not be taken as a stand when the matter was decided’.
The Court reproduced a passage from “Halsbury’s Laws of England, Vol. 16(2), 4th Edn., Para 907 to bring out the meaning of the concept of waiver. The passage stated, “The expression ‘waiver’ may, in law, bear different meanings. The primary meaning has been said to be the abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted, and is either express or implied from conduct. It may arise from a party making an election, for example, whether or not to exercise a contractual right… Waiver may also be by virtue of equitable or promissory estoppel; unlike waiver arising from an election, no question arises of any particular knowledge on the part of the person making the representation, and the estoppel may be suspensory only. Where the waiver is not express, it may be implied from conduct which is inconsistent with the continuance of the right, without the need for writing or for consideration moving from, or detriment to, the party who benefits by the waiver, but mere acts of indulgence will not amount to waiver; nor may a party benefit from the waiver unless he has altered his position in reliance on it.”
Alluding to the case above, the Court observed that the insurer had custody of the policy and was fully aware of the prerequisites outlined in clauses 5(3) to 5(5).Despite being aware of the conditions of the above clause, the company appointed a surveyor. The repudiation letter just mentioned that the claim lodged by the insured did not fall under the purview of transit loss. The Court observed that, by its positive action, the insurer had waived its right to raise the plea that the claim was not tenable, as the conditions outlined in the duration clause were not met by the insured.
The Court, while commenting on the merits of the claim, observed that the surveyor had provided a report stating a loss, which he had quantified. The Court held the decision of the State Commission, which ignored the investigator’s report, as the investigator was appointed on 16 April 1998, without any valid reasons. The first surveyor confirmed in its reports the shortage/loss of AAAC due to pilferage during transit and estimated the loss, which was subsequently confirmed by the Katigorah police.
Having satisfied itself with the surveyor’s report and scrutinised the judgment and order passed by the State Commission in this regard, the Court observed that it was completely satisfied that the determination made by it ( State Commission) was absolutely impeccable.
Thus, we find that by appointing a surveyor to assess the loss, the insurer had waived the right which was in its favour under the duration clause.
Distinguishing features – M/s. Sonell Clocks and Gifts Ltd.:Versus: The New India Assurance Co. Ltd and Galada Power and Telecommunication Ltd.Vs. United India Insurance Co.Ltd.
1. M/s Sonnel Clocks and Gifts Ltd had a fire policy on a reinstatement value for one year; Galada Power and Telecommunication Ltd., on the other hand, had an inland marine Transit policy.
2. In both cases, there was a delay in intimation. While condition 6 of the fire policy dealt with intimation about loss, in marine insurance, the same is addressed in clause 5 of the duration clause.
3. The bone of contention in both cases was that the insurer had waived the condition relating to delay in intimation by appointing a surveyor. While in the Galdada Power case, the appointment of a surveyor was considered a waiver; however, in the case of M/S Sonell Clocks and Gifts Ltd., the appointment of a surveyor was not considered a waiver of right.
4. In the Galdada Power case, the insurer had possession of the policy. It was aware of the clause relating to duration, but despite these stipulations, it appointed a surveyor. Additionally, as stated earlier in the letter of repudiation, it only stated that the claim lodged by the insured did not fall under the purview of transit loss. Thus, the Court held ‘by positive action, the insurer has waived its right to raise an appeal that the claim was not entertainable because conditions enumerated in the duration clause were not satisfied’.
In the case of M/S Sonnel Clocks and Gifts Ltd, the letter of repudiation dated 18th February 2005 mentioned that the claim was rejected because neither the intimation of the loss had been given to the insurer immediately after the loss nor were the requisite particulars of the loss conveyed within the stipulated period. It categorically stated that there was a breach of the terms and conditions of Clause 6 of the policy’s general conditions.
The survey report also mentioned that it was challenging to estimate the damages for the reasons stated therein and that the complainant’s claim was not payable due to a breach of Clause 6 of the policy’s general conditions. So, there was no quantification of the loss for the apparent reason.
5. In the Galdada Power case, the Court considered Clause 5 of a Marine Insurance Policy. The issue of contention was whether the insurance cover itself expired by efflux of time, and whether the intimation given by the insured to the insurer, not made within 7 days of the vehicle’s arrival at the destination mentioned in the policy.
According to the policy (assuming there is no Concealed Damage clause), the insurance cover expires 7 days after delivery, and there would be no coverage beyond the stated 7-day period.
It is in this context that the Court rightly noted that the insurer’s appointment of the surveyor beyond the said period can be deemed an act of waiver by the insurer of the position that the policy stands extinguished. In other words, the Court inferred that the appointment of a surveyor by the insurer was an expression of the insurer’s stand that the insurance cover continued despite the completion of the duration clause.
In the case of M/S Sonnel Clocks and Gifts Ltd., there was no disagreement about the existence of the policy. The issue was that of a violation of Condition No. 6 of the policy.
Clause 5 of the marine policy and Clause 6 of the fire policy differed considerably in terms of their interpretation and cannot be compared as such.
The Court noted that Clause 5 of the Marine Insurance Policy, subject matter in Galada’s case, did not have a negative covenant, as in this case, in the proviso to Condition No. 6 of the fire policy. The Court observed that “The fulfilment of the stipulation in Clause 6 of the general conditions, i.e., of the policy, is the sine qua non to maintain a valid claim under the policy.
The stipulation clause ‘No claim under this policy shall be payable unless the terms of this policy condition have been complied with’ is sine qua non (an essential condition; a vital thing), and is often missed while processing a fire claim.
In brief, we can conclude that the nature of policy wordings is most significant when it comes to invoking either waiver or estoppel. Drafting a repudiation letter requires careful consideration of the policy conditions, exclusions, and exceptions.
Authored By:
Dr Abhijit K.Chattoraj – Chartered Insurer
