Case Name: United India Insurance Co. Ltd. v. Levis Strauss (India) Pvt. Ltd.
Citation: 2022 LiveLaw (SC) 487
Summary
The Supreme Court ruled that when two insurance plans overlap and one insurer completely indemnifies the insured for a defined loss, the other insurer is not responsible for a claim pertaining to the same incident. United India Insurance Co. Ltd. provided Levis Strauss (India) Pvt. Ltd. (the insured) with a Standard Fire and Special Perils Policy (SFSP Policy) to cover its stored goods for two periods: from January 1, 2007 to December 31, 2007, and from January 1, 2008 to December 31, 2008. The insurer’s parent firm, Levis Strauss & Co., acquired a global policy (STP Policy) from Allianz Global Corporate & Speciality (Allianz) covering the dates of May 1, 2008, through April 30, 2009. For the period of 01.05.2008 to 01.05.2009, Allianz published a second “all risks” insurance (AR insurance) that covered the global stock of its subsidiaries.
The insured made a claim of Rs. 12.20 crores against the insurer on July 18, 2008, but the insurer subsequently rejected the claim, citing the exclusion of obligation for loss payable under maritime insurance, or STP insurance, as stated in Condition No. 4 of the SFSP Policy. The Court ruled that the insurer had disclaimed liability from risks covered by a marine policy, in this case the STP policy. The insured had already collected roughly Rs. 19 crores from Allianz in opposition to the claim of Rs. 12.2 crores.
About the case
Recently, the Supreme Court ruled that where two insurance plans overlap and one insurer completely indemnifies the insured for a defined loss, the other insurer is not responsible for a claim pertaining to the same incident. Judges UU Lalit, S. Ravindra Bhat, and P.S. Narasimha made up the bench that heard the appeal challenging the National Consumer Disputes Redressal Commission (NCDRC) ruling ordering the insurance firm to pay Rs. 1.78 crores to settle the insured party’s claim. The Apex Court stated that the issue in this case was “double insurance” or “overlapping policy,” when the business seeks coverage of the same risks, even if it held that the insurance provider was not obligated to pay.
The insurer, United India Insurance Co. Ltd., provided Levis Strauss (India) Pvt. Ltd. (the insured) with a Standard Fire and Special Perils Policy (SFSP Policy) to cover its stored goods for two periods: from January 1, 2007 to December 31, 2007, and from January 1, 2008 to December 31, 2008. The insurer’s parent firm, Levis Strauss & Co., acquired a global policy (STP Policy) from Allianz Global Corporate & Speciality (Allianz) covering the dates of May 1, 2008, through April 30, 2009. It included the insurer’s equity as well as that of all its subsidiaries. For the period of 01.05.2008 to 01.05.2009, Allianz published a second “all risks” insurance (AR insurance) that covered the global stock of its subsidiaries.
A fire broke out in one of the warehouses holding the insured’s stocks on July 13, 2008. The insured made a claim of Rs. 12.20 crores against the insurer on July 18, 2008. On September 11, 2009, the insurer subsequently rejected the claim, citing the exclusion of obligation for loss payable under maritime insurance, or STP insurance, as stated in Condition No. 4 of the SFSP Policy. Without determining whether the STP policy qualified as a marine policy, the insured filed a complaint with the NCDRC, which accepted it. The STP Policy’s Clause 47 states that it does not extend the scope of the domestic policy. According to this ruling, Allianz would compensate the insured for the loss of profit they would have received from selling the damaged stock, but the insurer would also be responsible for any losses incurred up to the cost of the products.
Since Allianz had paid the insured 19.52 crores, it approved the claim up to Rs. 1.78 crores. In his capacity as an advocate for the insurer, Mr. A.K. De argued that the STP Policy, which covers overseas policies, addressed the danger of fire to stock both in store and during shipment. He criticized the NCDRC’s interpretation of Clause 47 of the STP Policy and Condition No. 4 of the SFSP Policy, holding that damage incurred by goods was covered by the STP Policy, whilst loss of wages was covered by the SFSP Policy. It was claimed that the loss could not have been divided because it was a composite loss. According to Section 4 of the Marine Insurance Act of 1963, a marine insurance contract may be extended to protect the guaranteed against losses on inland waters or on any land risk that may arise incidental to a sea voyage, either by express provisions of the contract or by use of trade. The Court observed that, in addition to voyage and other marine risks, marine insurance policies in India cover warehouse hazards, citing a string of rulings. Additionally, the STP policy states that it covers risks other than maritime ones. The Policy also identifies itself as a “Open Marine Insurance Contract.” It noted that because the policy covers marine hazards, it qualifies as a marine cover. Condition No. 4 of the SFSP Policy, according to the Court, stipulated that in the case of an insurance risk, the insurer would not be liable if the insured was eligible to make a claim under a maritime policy.
Drawing from prior cases such as Export Credit Guarantee Corporation of India Ltd. v. Garg Sons International (2014) 1 SCC 686; Vikram Greentech India Ltd. v. New India Assurance Co. (2009) 5 SCC 599; Sikka Papers Ltd. v. National Insurance Co. (2009) 7 SCC 777; and Impact Funding Solutions Ltd. v. Barrington Support Services Ltd. (2016) UKKSC 57, the Court determined that the insured party could only limit its liability by using unambiguous language.
Strictly interpreting Condition No. 4, the Court determined that the insurer had disclaimed liability from risks covered by a marine policy, in this case the STP Policy. In addition, the Court pointed out that the insurer was not required by law or contract to get a domestic policy in order to conduct business, and as a result, NCDRC had incorrectly applied Clause 47.The insured had filed a claim with the insurance for Rs. 12.2 crores. It has already collected roughly Rs. 19 crores from Allianz in opposition to the claim of Rs. 12.2 crores. Taking this into consideration, the Court noted that an insurance contract is one for defined loss indemnification. When there are certain dangers, the insured cannot benefit from having two policies. Referred to in this regard was Castettion v. Prestton (1833) 11 QBD 380, which had held that the insured would receive full indemnity in the event of a loss, but will never receive more than complete compensation.
