Case Title: Reliance General Insurance Co. Ltd. vs. Seven Islands Shipping Ltd. & Anr.
Summary
The National Consumer Court (NCDRC) dismissed an appeal filed by Reliance General Insurance Co. Ltd. against Seven Islands Shipping Ltd. and Athena Insurance and Reinsurance Brokers ‘P’ Ltd. The NCDRC upheld the Maharashtra State Consumer Commission’s order, which ordered the insurance company to pay Rs. 68,60,789/- with interest at 12% per annum as the insurance claim, Rs. 1 Lakh as compensation for mental agony, and Rs. 25,000/-the costs of litigation. The insurance company provided coverage for the main engine of the “MT Crystal” tanker vessel, but the main engine suffered damage due to white metal penetration. The company denied the claim, claiming that the business had lied about two insurance claims filed on a different ship in the previous two years.
The complaint also claimed that a precise question on “accidents during the past three years to any vessel owned by the insured” was asked on the proposal form, and the insurance company reimbursed the sum to the complainant and declared the policy worthless ab initio. The NCDRC upheld the State Commission’s ruling that Warranty No. 8 had not been broken, stating that there was no proof of hiding a material fact in the proposal form. The commission found it illegal to reject the policy and declare it void from the beginning, relying on a ruling by the Supreme Court in General Assurance Society Ltd. vs. Chandumull Jain and United India Insurance Company Limited vs. Pushpalaya Printer.
About the case
Judge Ram Surat Ram Maurya, the Presiding Member, and Judge Karuna Nand Bajpayee, the Member, of the NCDRC dismissed the appeal that Reliance General Insurance Co. Ltd., the Insurance Company, filed against Seven Islands Shipping Ltd., the Complainant, and Athena Insurance and Reinsurance Brokers ‘P’ Ltd., the Insurance Agent. Upon receiving a deposit of Rs. 6,87,316/-as premium from the Complainant, the NCDRC upheld the order of the Maharashtra State Consumer Commission, which accepted the complaint and ordered the Insurance Company to pay Rs. 68,60,789/-with interest at 12% per annum as the insurance claim, Rs. 1 Lakh as compensation for mental agony, and Rs. 25,000/-the costs of litigation.
The Insurance Agent contacted the Complainant, a shipping business, asking for a “Marine Hull Insurance Policy” for their tanker vessel, MT Crystal. The policy included a premium of Rs. 6,72,528 that was payable in quarterly payments of Rs. 1,68,132. The Complainant paid the stamp duty of Rs. 14,788 on time. The Insurance Company provided a coverage for Rs. 14,78,75,000 that covered the vessel’s machinery and hull. Because white metal had penetrated the crankcase and caused damage, the main engine of the “MT Crystal” had damage that resulted in a decline in lubricating oil pressure. About the damage and the requirement to take the vessel to a port for repairs, the Complainant notified the Insurance Agent. The Insurance Company verified the towage charges after receiving notification from the Agent.
AI Mubarak Overseas, which the complainant hired to tow the vessel to Mumbai, sent an invoice for USD 252,343.75. Following the repairs, the Complainant filed an insurance claim, and the Insurance Company designated Dhiraj Offshore Surveyors & Adjusters Pvt. Ltd. as the surveyor. The Insurance Company requested information about the Complainant’s prior claims made over the past five years on other vessels. It denied the claim, claiming the business had lied about two insurance claims filed on a different ship, “M.T. Twinkle,” in the previous two years. Additionally, it claimed that Warranty No. 8 had been broken by the aforementioned act. The complaint claimed that a precise question on “accidents during the past three years to any vessel owned by the insured” was asked on the proposal form, and the question was answered truthfully. The insurance company reimbursed the sum to the complainant and declared the policy worthless ab initio. The Insurance Company did not respond to survey reports evaluating the loss or legal notices.
Due to jurisdictional concerns, the State Commission received the complaint that the Complainant had originally filed with the NCDRC. The State Commission heard the case, accepted the complaint, and ordered the insurance company to pay the insurance claim of Rs. 68,60,789/-with interest at the rate of 12% annually, provided the complainant deposited Rs. 6,87,316/-as premium, Rs. 1 Lakh as mental anguish compensation, and Rs. 25,000/-for litigation costs.
The Insurance Company contended that the Complainant had purposefully withheld material information from the Proposal Form, which included a particular question about any incidents that had occurred to any of its vessels during the previous three years to which it had responded “Not Applicable”. Completed proposal form with Warranty No. 8 stating “No claim has been made on Seven Island Fleet during the last 5 years” and payment for the installments was turned in by the complainant.
The Complainant submitted insurance claims for the accidents, and the Insurance Company found out that she had an insurance policy from IFFCO Tokio General Insurance Company Limited for another vessel. It ruled the policy void ab initio and reimbursed the plaintiff for the premiums they had paid without raising any issues.
Additionally, it cited Section 20 of the Marine Insurance Act of 1963, which emphasizes the need for complete disclosure of all relevant circumstances and the insurer’s right to void the contract if such disclosure is not made. Furthermore, the Insurance Company claimed that the complaint could not be maintained because it was made about two years after the incident occurred.
Rejecting the appeal, the NCDRC upheld the State Commission’s ruling that Warranty No. 8 had not been broken. It noted that the complaint had submitted two claims, both of which were made after the insurance company issued the policy, according to a letter reviewed by IFFCO Tokio General Insurance Company Limited.
Since the term “accident” alludes to an unanticipated tragic incident that causes harm or injury, the Commission pointed out that there is no proof of hiding of a material fact in the proposal form. IFFCO Tokio General Insurance Company Limited’s letter further said that the complainant had submitted two claims for damage to the “main engine turbocharger”—one for an incident that occurred before completing the relevant Proposal Form and another for an incident that occurred subsequent to completing the Form. Therefore, there is no proof that the “main engine turbocharger” damage was caused by an accident, which would imply an outside force rather than the typical wear and tear that is covered by the insurance policy.
The Commission found that it was illegal to reject the policy and declare it void from the beginning. It relied on a ruling by the Supreme Court in General Assurance Society Ltd. vs. Chandumull Jain, which was affirmed in United India Insurance Company Limited vs. Pushpalaya Printer. The ruling stated that if a proposal form contains ambiguities, the insurer who drafted the form should be held accountable. The NCDRC noted the insurance company’s cited cases—Oriental Insurance Company Limited vs. Mahendra Construction and Contship Container Lines Limited vs. D.K. Lall—do not relate to the facts of the present case.
