Case title: Hind Offshore Pvt Ltd v. IFFCO General Insurance Co. Ltd.
Summary
The Supreme Court has ruled that marine insurance policies cannot be held responsible for losses resulting from ships being sent into the ocean while not seaworthy. The Court emphasized that an insurer’s awareness of a guarantee breach does not automatically translate into a waiver. To obtain insurance coverage for a vessel based on a classification certificate, the Classification Society must be notified of any inadequacies or deficiencies in advance of the certificate’s issuance. The NCDRC denied an appellant’s maritime insurance claim of 16 crores due to the appellant concealing prior damage to the primary port engine from the class certification authorities. The court concluded that if a ship is sent to sea in an unfit state and the insured party knows about it, the insurer will not be held responsible for any losses. The court also highlighted the importance of trust and transparency in policy issuance. The appellant may have notified the respondent that the advance receipt was not being used, but an open and honest stance would have given the appellant a rightful stage to make their argument.
About the case
According to a recent ruling by the Supreme Court, the insurer under a marine insurance policy is not responsible for any losses resulting from a ship that is sent into the ocean while not seaworthy. It further noted that unless expressly indicated, an insurer’s awareness of a guarantee breach does not automatically translate into a waiver.
The Court decided that in order for an insured party to get insurance coverage for a vessel based on a classification certificate, the Classification Society must be notified of any inadequacies or deficiencies in advance of the certificate’s issuance. This is significant since the insurance coverage is predicated on the understanding that the Classification Society carefully considered every factor before granting
the certificate. The NCDRC denied the appellant, who lost the vessel and his cargo in an accident, a maritime insurance claim of 16 crores. The bench, which included Justices AS Bopanna and MM Sudresh, was considering this appeal.
In this instance, the appellant concealed prior damage to the primary port engine from the class certification authorities. In this instance, the respondent (insurer) had charged the appellant 8 crores for a maritime hull insurance coverage for his yacht between 2005 and 2006.
The primary port engine was damaged in 2006. After conducting an inspection, the surveyors concluded that it could not be repaired. However, the engine was only temporarily fixed because the replacement duration was six months and there was an urgent commercial demand. One crore rupees was given by the responder to replace the engine crankshaft.
At this point, the respondent gave the appellant a new policy for 2006-07. After surveying the ship, the American Bureau of Shipping issued a class certificate on October 19, 2006. Sadly, the ship was hit by a tugboat on December 3, 2006, and it sank. The respondent hired a surveyor to estimate the loss, and the appellant demanded 8 crores from them. According to the surveyor, the appellant failed to notify ABS about the prior damage to the main port engine. It also stated that the class certificate would be immediately suspended if any damage was sustained by the vessel and it was not reported to the class.
As for the prior surveyors, their final report from the first disaster was released in 2007 and stated that since there was little chance of the vessel being recovered, there was no need for permanent repairs and that the 1 crore rupees that had been granted earlier should be reimbursed.
After reviewing the Marine Insurance Act of 1963, the Court concluded that if a ship is sent to sea in an unfit state and the insured party knows about it, the insurer will not be held responsible for any losses. In this case, the classification certificate from a classification society is significant since it certifies that the ship complies with particular operating and safety requirements. The Court explained that the very foundation of the Classification Certificate is jeopardized if defects in a vessel were not reported to the Classification Society before the issuance of a certificate and it is later found that these defects were concealed and warranty conditions were not met.
The Court stated that there is no proof that the engine replacement had been waived prior to granting the current insurance policy, despite the insurer knowing that repairs had been made and a trip was scheduled because of the waiting period for an engine replacement. Consequently, there was no express or implied indication of waiver when the insurance firm provided the policy using the Class Certification.
The court emphasized that parties concerned must operate in good faith in order to preserve the integrity of the contract, underscoring the fundamental role that trust and transparency play in policy issuance. The appellant might have notified the respondent that the advance receipt was not being used, the court points out. When the engine crankshaft became available, this may have been combined with an offer to repay the money or a mutual agreement to keep the money for later use. According to the court, taking such an open and honest stance would have given the appellant a rightful stage on which to make their argument.
