Insurance – Standard Fire & Special Perils Policy (SFSP Policy) – STP Policy – Insurance by different Insurers – When One Insurance Policy ousts the application of Other Insurance Policy – Respondent claimed benefit of insurance policy (SFSP Policy) provided by the appellant-insurer – Per contra the appellant refused to grant the benefit of insurance to the respondent upon the premise that the losses suffered by the respondent were covered under insurance policy (STP Policy) obtained from AGCS (respondent’s parent company) – Aggrieved, the respondent approached the NCDRC – NCDRC allowed the insurance claim of the respondent holding that Condition-4 of SFSP policy would support the claim of the appellant only if the other policy (the one issued by AGCS) was a marine policy, which as per NCDRC, was not – Further by virtue of S. 25 of the Nationalization Act, the respondent was under obligation to cover the risks through a domestic policy, which they did in the present case and hence were entitled to the full benefit of SFSP Policy – On appeal, held: As far as obligation u/s. 25 of the Nationalization Act is concerned, NCDRC was wrong – Mere prohibition in s. 25 of the Nationalization Act clearly did not apply to respondent’s parent company, which conducts business overseas (and not only in India) and obtain a marine cover which catered to all risks, (including marine risks as well as risks to the goods in transit and when they were warehoused) – Therefore, the prohibition in s.25 per se does not apply – Equally, there was no specific provision requiring respondent to obtain a domestic policy, in the conduct of its business – NCDRC also erred in holding that the STP policy was not a marine policy since the policy, comprehensively covered all kinds of risks including marine risks and what is material is not whether the insurable event occurred during the voyage rather, the focus is on the nature of the cover and the cover clearly and unequivocally included marine perils therefore, it was a marine cover – Condition No. 4 of the SFSP Policy, which constituted a contract between the parties, precisely contemplated a situation whereby in the event of occurrence of an insurance risk, if respondent (or someone on its behalf, like in the present case the parent company) was entitled to claim under a marine policy, the insurer was not to be held liable – Therefore, condition No.4 operated to exclude the appellant-insurer’s liability.
Words/Phrases – Double Insurance – discussed.
Allowing the appeal, the Court
HELD: 1. The expression “marine adventure” is defined by Section 2(d). Similarly, “maritime peril” referred to in “marine adventure” is defined in Section 2(e). Section 3 defines a marine policy; Section 4, which is relevant for this case, deals with mixed marine and land risks. It inter alia, enables coverage – through “express terms, or by usage of trade” – extension of marine policies “so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage.” Warehouse risks, combined with voyage and other marine risks, are considered as part of marine insurance policies in India. In the present case, the first two recitals of the STP Policy, as well as the warehouse-to-warehouse transit (Clause 6) and other stipulations clearly state that the policy covers both marine and other risks. In fact, the STP describes itself as “OPEN MARINE INSURANCE CONTRACT”. [Paras 28, 30, 31][250F, G-H; 252-D, G]
2. It is clear that the STP Policy was a marine policy which comprehensively covered voyage, transit, transportation and warehouse perils. As can be seen from the description of the policy, and other express stipulations, all kinds of risks, including marine risks were covered. In fact, different limits for “retail locations” were provided; further Clause 6 also extended to warehouse risks. In these circumstances, and having regard to the law declared by this Court, what is material is not whether the insurable event occurred during the voyage; rather, the focus is on the nature of the cover. The cover in this case, clearly and unequivocally included marine perils. Therefore, it was a marine cover. Condition No. 4 of the SFSP Policy, which constituted a contract between the parties, precisely contemplated a situation whereby in the event of occurrence of an insurance risk, if respondent (or someone on its behalf, like in the present case the parent company) was entitled to claim under a marine policy, the insurer was not to be held liable. In the light of the above discussion, on a plain and reasonable construction of Condition No. 4 of the SFSP policy, that once it is established that respondent– or on its behalf, in this case, its parent company – was covered for the risk under a marine policy, (the STP Policy) and was entitled to claim under it, the appellant insurer’s liability was excluded. Therefore, on a plain construction of the terms of the policy issued by AGCS, it was a marine policy. Therefore, Condition No. 4 operated to exclude the insurer’s liability. [Paras 32, 33, 36][252-G-H; 253-B-C; 254-D-E]
3. It is not respondent’s position that there exists any legislation which compelled it to obtain insurance to cover risks which it sought to get covered by the SFSP Policy. In this context, a mere prohibition in Section 25 of the Nationalization Act clearly did not apply to respondent’s parent company, which conducts business overseas (and not only in India) and obtain a marine cover which catered to all risks, (including marine risks as well as risks to the goods in transit and when they were warehoused). Therefore, the prohibition in Section 25 per se does not apply. Equally, there was no specific provision requiring respondent to obtain a domestic policy, in the conduct of its business. The NCDRC, in this Court’s opinion, was clearly wrong in holding that Clause 47 applied and it had to be read in the way it was. [Para 42][257-A-D]
4. A plain reading of Clause 41 of STP Policy shows that where fire insurance or any insurance which was taken out by the carrier was available to the beneficiary, i.e., respondent, or ‘would be so available’ if the STP did not exist, then a claim under that policy, i.e., STP Policy would not be maintained and the insurance would be void to that extent. There is nothing on the record to show that any carrier or bailee in this case made a claim upon Alliance or any other insurer to recover possible liability in furtherance of any policy. What has been established from the record is that the sum of $4.54 million was in fact disbursed to respondent as admitted liability by AGCS. In the circumstances, clearly, Condition No. 4 of the SFSP Policy operated and excluded the appellant-insurer’s liability. [Para 44][258-B-D]
5. What is in issue in this present case has been characterized as “double insurance”, i.e., where an entity seeks to cover risks for the same or similar incidents through two different - overlapping policies. There is a wealth of international jurisprudence on the various nuances of double insurance. Such double insurance is per se not frowned upon in law. The courts however, adopt a careful approach in considering policies which seeks to exclude liability on the part of the insurer. In the present case, the facts are that the only claim preferred by respondent with the insurer on 18.07.2008 was for ` 12.2 crores. There is no material on the record to show that during the subsistence of the policy issued by the parent insurer, it was ever notified by respondent about the existence of the policy issued by AGCS. The final report of the surveyors appointed by the appellant insurer assessed the total loss at ` 11.70 crores. However, it also stated that as respondent’s parent company had obtained another policy under which the loss was to be recovered, the claim was inadmissible because of Condition No. 4 of the SFSP Policy. It is also a matter of record that as against the claim of ` 12.2 crores made upon the insurer in this case, respondent ultimately received equivalent of over ` 19 crores. A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less. In the case of specific risks, such as those arising from loss due to fire, etc., the insured cannot profit and take advantage by double insurance. [Paras 45, 49, 50][258-D-E; 262-A-D]
Peacock Plywood Pvt. Ltd. v. The Oriental Insurance Co. Ltd. [2006] 10 Suppl. SCR 140; United India Insurance Co. Ltd. v Great Eastern Shipping Co. Ltd. [2007] 9 SCR 350; Export Credit Guarantee
Corporation of India Ltd. v. Garg Sons International (2014) 1 SCC 686 : [2013] 1 SCR 336; Vikram
Greentech India Ltd. v New India Assurance Co. (2009)
5 SCC 599 : [2009] 5 SCR 437; Sikka Papers Ltd. v. National Insurance Co. (2009) 7 SCC 777 : [2009] 9 SCR 1088; Impact Funding Solutions Ltd. v. Barrington Support Services Ltd. [2016] UKSC 57 – relied on.
M/s. Galada Power and Telecommunication Ltd. v. United India Insurance Co. Ltd. (2016) 14 SCC 161; New India Assurance Company Limited and Ors. vs. Rajeshwar Sharma & Ors. (2019) 2 SCC 671 : [2018]
14 SCR 1181 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.