INSURANCE LEGAL JUDGEMENTS NEWS LETTER

Life and non life judgments

Volume : 1 Feb 2013 Date.28.02.2013

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI ORIGINAL PETITION NO. 165 OF

2000 Andagro United Services Ltd.

Now Known as Noble Resources &

Trading India Pvt. Ltd. Registered office at

1A, Vandana Building, 11,Tolstoy Marg New Delhi – 110 001

Carrying on business at :

45-47, Atlanta, Nariman Point

Mumbai – 400 021 …… Complainant

Versus

1. United India Insurance Co. Ltd.

Registered office at 24, Whites Road, Chennai & Divisional Office No.5, 68/1

Janpath, New Delhi 2. Central Warehousing Corporation

Through its CMD, having its Registered office At

4/J, Siri Fort, Institutional Area, Khel Gaon Marg

New Delhi – 110 016 At Opp.Fire Station, Near West

Gate, Kandla Port …Opp.parties

BEFORE

HON’BLE MR. JUSTICE J.M. MALIK, PRESIDING MEMBER

HON’BLE MR. VINAY KUMAR, MEMBER

For the Complainant : Ms. Ramni Taneja, Advocate For OP1 : Mr. S.M. Tripathi, Advocate For OP2 : Mr. Manoj K. Srivastav, Advocate

PRONOUNCED ON 19.02. 2013

O R D E R

AS PER JUSTICE J.M.MALIK

1. In this case, filed in this Commission on 07.06.2000, the main controversy swirls around the question “Whether the ‘Doctrine of Contribution’ is applicable in this case?. The marine policy is pitted

DISPUTE ON INSURABLE INTREST

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against a Fire Policy, obtained from United India Insurance Co. Ltd., OP2, in this case. Clause 4 of the Fire Insurance Policy states . “This insurance does not cover any loss or damage to property, which at the time of the happening of such loss or damage, is insured by or would, but for the existence of this policy, be insured by any marine policy or policies except in respect of any excess beyond the amount which would have been payable under the Marine Policy or policies had this insurance not been effected”. The other question is “Whether other clauses of Insurance Policy will pale into insignificance?. The said Clause is to be read as vacua or as a part of whole composite policy?. The another knotty question is “Whether the complainant has insurable interest?. 2. Let us now proceed to mention the facts of the case. The complainant is an Importer and Dealer in commodities. In April, 1998, the complainant imported 5000MTs sugar to Kandla. The sugar was purchased CIF (Cost, Insurance, Freight) and the complainant’s Seller insured the cargo with Gerling-Konzern, who are the marine insurers and assigned the insurance to the complainant. The insurance with marine insurers was on a declaration basis and it was declared for a proportion CIF value of USD 662112. The cargo arrived at

Kandla on 04.05.1998 by ship. It was cleared by the customs. A total relevant quantity of 181 MTs remained with the port premises and were stored in Central Warehousing Corporation (CWC), OP2. OP 2 charged the complainant for warehousing services and as a separate charge, charged for obtaining insurance. Insurance covered risk of “storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation”. The consideration was paid by the complainant in the first instance to OP2 and OP2 subsequently passed on the same to the United India Insurance Co. Ltd.,OP1. OP2 is required to make periodical declarations to OP1. OP2 is bound to obtain a proper and adequate insurance cover and to ensure that any insurance claim is paid to the complainant.

3. On or about 09.06.1998, a total quantity of 181MTs remained in the godown of OP2. The port of Kandla was hit by a storm/cyclone, became inundated and flooded and was otherwise struck by an occurrence covered by the insurance policy. The warehouse and the port was flooded and all the goods were rendered unfit for human consumption. The goods were tested by the Port Health Organisation and were found not to conform to the standards and provisions of the Prevention of Food Adulteration Rules. Certificate in this context, dated 26.06.1998 has been placed before the Commission. OP2 was the Bailee of the goods and in

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actual custody of the goods. It was required to take due care of the goods as well as to take all necessary steps to protect the goods. On 17.11.1998, the complainant filed its claim with OP2. OP2 refused to disclose the terms of the insurance. Sh.H.Srinivasan, Sr.Divisional Manager of OP1 refused to disclose the full terms and conditions of the policy. He read over selective reading which was designed to mislead the complainant which is itself a deficiency in service. 4. Prior to that, on 03.03.1999, the OPs forced and induced the complainant to give an undertaking that they would not claim under the marine policy, but refused to disclose the policy. The complainant by its letter dated 08.03.1999, gave the undertaking. In response to the complainant’s Advocate’s letter, the OP2, purported to have forwarded a copy of the policy by its letter dated 25.08.1999. The said policy contained only one printed page which purported to exclude the liability of OPs. The non-supply of the full copy was another deficiency in service. The above said copy was incomplete and incorrect. However, vide their letter, dated 09.11.1999, OP1 dishonestly stated that the policy was complete. The complainant vide its letter dated 23.12.1999 asked the OP to send copy of each page of the policy, but in response to the said letter, the complaint policy was not sent, instead, a blank form containing printed terms and conditions was se

5. In the meantime, the complainant’s marine insurer, on 21.10.1999, in absence of any accurate information on the policy of OP1, considered the claim as a ‘Double Insurance’ and settled the claim by paying 50% of the policy and balance was to be claimed from the OP’s policy. The claim of the complainant results from a total loss of 1881MTs of white refined sugar valued at USD 352.00 per MT @ Rs.44.05 equivalent to Rs.15,505.60 per MT and having a total value of USD 662,112.00 @ Rs.44.05 equivalent to Rs.2,91,66,033.60. The complainant claims the sum of USD 4,65,910.00 @ Rs.44.40 equivalent to Rs.2,06,86,406.24 being the total of the actual relevant cost of the goods i.e. USD 331,056.00 @ Rs.44.40 equivalent to Rs.1,45,79,706.24 plus interest @ 21% p.a. from the date of loss, i.e. 09.06.1998 till 06.06.2000. The complainant has also claimed other proportionate relevant expenses in the sum of Rs.6,78,787/- along with interest @ 21%.p.a., compensation and damages in the sum of Rs.1,20,00,000/- against the OPs, jointly and severally. 6. It is contended that the above said deficiency, on the part of OPs is apparent. The policy and full terms, and complete policy was never disclosed. The complainant was misled by giving false excerpted terms of the policy. The failure of the OP to consider and honour the complainant’s claim or to perform the acts and deeds and things necessary

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for the expeditious consideration and the honouring of the complainant’s claim by the marine insurers. In the alternative, if the policy does not cover the complainant’s claim, the said OP has provided deficient service in charging premium and failing to obtain a proper and complete insurance policy with the complainant, the acts and omissions of OP has resulted in the complainant’s claim being settled at 50% on their claim by the marine insurers and, therefore, OPs are liable to pay for the same. Again contract of insurance is a contract of ‘uberrimae fides’.OP1 owed a duty of utmost good faith to the complainant and was in breach of their duty. It avoided to perform all the obligations. 2nd OP was an agent and/or bailee and/or warehouseman and owed diverse duties of care and faith to the complainant. OP2 while working with OP1 in cahoots, sought to avoid making payment under the insurance and to assist the OP1 in breaching its obligations. 7. In its written statement, OP1 has listed the following defences. The complainant is not a “consumer”. The complainant has not hired or availed of any services from OP1 for a consideration. It is also not the beneficiary of such services. The complainant is not a ‘consumer’ in terms of Section 2(b)(i) of CP Act, 1986 as he has not hired or availed of the services of OP1. Before a dispute can be termed as a ’consumer dispute’, it is necessary

that the petition should be in terms of the Act. This complaint does not constitute a complaint in terms of Section 2(c)(iii) as there is no consumer dispute and the complaint is not maintainable. The complainant does not disclose any provisions of law under which the services by the OP1 was required to be maintained. OP1 did not undertake any services to be performed to complainant in pursuance of a contract or otherwise as there is no question of any deficiency in discharge of its service.

8. As a matter of fact, OP1 had issued a Fire Insurance Policy to OP2. The said contract is purely between the OPs. No third-party or a stranger to a contract has any right to lay his claim against OP1 on the basis of the said insurance policy. The above mentioned insurance policy issued in favour of OP2 is itself dependant for its revival upon the compliance by OP2 with the terms and conditions and obligations specified in the policy. OP2, in whose favour the insurance policy has been issued, can also not transfer its rights under the policy to a third-party without the consent of OP1 as the insurance policy is a personal contract between the contracting parties. The complainant cannot acquire a right to sue under the policy and cannot maintain the petition against the OP1. The complainant had no right to ask declaration of the contents of the insurance policy existing between OP1 and OP2 and to which insurance policy the complainant

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itself is not a party. The complaint was not filed in accordance with Section 12 of Consumer Protection Act, 1986. 9. OP1 admits that the sugar was imported. The Seller had insured the sugar and the insurance policy was assigned to buyer/complainant. The contribution in marine insurance applies only when the insurable interest is covered in more than one insurance policies, which ought to have become clear to the complainant and its marine insurer that if at all there was a fire insurance existing in the name of OP2, it would necessarily cover the insurable interest only of OP2 in the goods, which insurable interest would be very different than the one possessed by the complainant in respect of the subject matter. Merely because the goods are the same, the contribution does not apply at all. It was wrong for the marine insurer to have assumed that contribution applied. In case the complainant and its marine insurers proceeded under a misunderstood provisions of insurance law, it is a matter between themselves and the OPs are not liable for the result flowing from such misunderstanding. Again, the subject matter of two contracts are not identical. The law of contribution does not apply. All the other allegations have been denied. 10. Now, we advert to the written statement of OP2. OP 2 admitted that the stock of the complainant was stored in the Kandla

Warehouse. The insurance of the stock was arranged with OP1 on behalf of the complainant. The storage charges as well as the insurance charges were collected from the complainant at the time of delivery of the stock. It is admitted that stocks of the complainant were damaged in a cyclone on 09.06.1998, due to natural calamity. Consequently, it cannot be said that there was deficiency in service on part of OP2. The marine insurance policy was assigned to buyer/complainant. The credit note towards insurance charges was, for the first time, raised only on 31.08.1998 onwards. Whereas, the credit note towards the storage charges was raised on 03.06.1998 onwards. The insurance charges were recovered from the complainant only subsequent to the cyclone on 09.06.1998. Even though the same had been paid by OP2 to the insurance company in advance. OP2 has taken fire declaration from OP1 on behalf of all depositors whose goods arrive in the warehouse and covers all warehouses, OP2, situated all over India. A sum of Rs.3.90 crores were paid by OP2 to OP1 as a premium towards the said policy for the year 1998-99. It is averred that the policy obtained by OP2 is a normal fire declaration with standard terms and conditions and, therefore, there was nothing confidential about the same. But on the other hand, the complainant failed to make available to OP2, the copy of marine insurance policy obtained by it, in spite of several

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reminders. The complainant has already got compensation to the extent of 50% of the claim. As per the conditions of the Fire Policy, the complainant had to first pursue the claim with the marine insurer. The marine insurer should have discharged its liability in full under the marine policy. The complainant should have pursued its right to recover the full amount of claim under the marine policy because it extended to cover the entire amount of loss. OP2 is not liable to the loss as it had happened force majure and secondly the fire insurance of a bailee covers interest from that of an owner of property and thirdly the fire insurance policies the world over contain the ‘Marine clause’ whereby the fire insurance can be called in to consider the claim, if any, only in excess of the liability under marine policy. 11. The claim made by

Complainant is an exaggerated

one. It cannot set up a claim for an

amount in excess of that calculated

strictly on the basis of principle of

indemnity. However, in any case,

OP2 is prepared to pay the

compensation to the depositors if

OP1 agrees to pay the same and the

same is received from OP1.

12. We have heard the counsel

for the parties and perused their

written synopses. Both the OPs

have placed much reliance on

Clause 4 of the Insurance Policy.

Before proceeding further, it would

be worthwhile to reproduce the

relevant salient features of the Fire

Policy.

Clause 4 of the said policy,

already stated above.

Clause 6 of the said policy

states : It is hereby declared and

agreed that the property insured

under this policy is either the

insured’s own or held by him/them in

trust, in deposit or in commission or

on joint account with others for which

he/they is/are liable in the event of

loss or damage by fire.

Clause 11 of the policy states :

If at the time of any loss or damage

happening to any property hereby

insured, there be any other

subsisting insurance or insurances,

whether effected by the insured or by

any other person or persons covering

the same property, this Company

shall not be liable to pay or contribute

more than its rateable proportion of

such loss or damage.

Clause 3 of the Special

Conditions appended with the policy,

runs as follows:- “If at the time of any

loss or damage happening to any

property hereby insured there be any

other subsisting insurance or

insurances, on other than a

declaration basis, whether effected

by the insured or by any other person

or persons covering the stocks

hereby insured, this policy shall apply

only to the excess of the value of

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such stocks at the time of the loss

over the sum insured by such other

insurance or insurances, this

Company shall not be liable to pay or

contribute more than that proportion

of such loss which such excess [or if

there be other declaration insurances

covering the same stocks, a rateable

proportion of such excess], but not

exceeding the Sum Insured hereby,

bears to the total value of the

stocks”.

Another special condition is

also reproduced hereunder :-

“It is understood and agreed

that the entire property in one

complex/location is extended to

cover risk of Storm, Cyclone,

Typhoon, Tempest, Hurricane,

Tornado, Flood and Inundation and

the sum insured for this extension is

identical to the sum insured against

the risk covered under Fire Policy

‘C’”.

13. It was argued that contribution

in marine insurance applies only

when the same insurable interest is

covered under more than 1

insurance policies. It was submitted

that it ought to have become clear to

both the complainant and his marine

insurer that if at all, there was any

fire insurance existing in the name of

OP2, it would necessarily cover the

insurable interest only of OP2 in the

insured property which insurable

interest would be very different than

the one possessed by the

complainant in respect of the subject

matter. It was emphasised that

merely because the goods are the

same, the contribution does not

apply at all. The marine insurer

wrongly assumed that the ‘Doctrine

of Contribution’ is applicable.

Moreover, there were two contracts

of insurance, i.e. (1) the marine

policy existing between the

complainant and his marine insurer

and (2) fire policy existing between

OP1 & OP2. Since it does not

contain the same insurable interest,

the law of contribution does not

apply and the OP1 had no duty to

disclose to overseas marine insurer,

the nature or extent of contract of fire

insurance existing between the OPs.

14. It was also argued that the

complainant had not hired or availed

of any service of OP2 for

consideration. The complainant is

also not a beneficiary of such

service. The complaint does not

constitute a complainant as there is

no consumer dispute vis-à-vis, this

OP. Since OP1 has not undertaken

any service to be performed by

complainant in pursuance of a

contract or otherwise, therefore,

there can be no allegation of

deficiency in this case. OP1 had

issued a fire insurance policy in

favour of OP2. There is no privity of

contract between the complainant

and OP1. OP2 also cannot transfer

its rights under the policy to a third-

party without the consent of OP1.

Again, insurance policy is a transfer

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contract between the contracting

parties. The complainant cannot

acquire a right to sue under the

policy and cannot maintain the

complaint. The complainant has no

right to ask disclosure of the contents

of the insurance policy existing

between the OP1 & OP2 to which

insurance policy, the complainant is

a stranger.

15. In their written submissions,

OP2 admits that the above said

cyclone did not give any time to OP2,

to save the stocks as there was no

prior warning. The cyclone caused

damage worth Rs.600.00 crores at

Kandla port. The official death toll

went up to 100 persons. The

complainant did not plead that there

was negligence on the part of OP2 in

keeping all the goods in warehouse

and ipso facto, the deficiency of

service does not arise on the part of

OP2. This is loss of goods and act of

God, which is not covered under the

fire policy. This is universal practice

across the globe. As per clause 4,

11 and clause 3 of the Special

Conditions, the complainant had to

exhaust the remedy first of all against

the marine policy to the full extent.

In the instant case, the complainant

submitted its undertaking/bond dated

08.03.1999 that the complainant

would not take the subject claim from

the Marine Insurance of M/s. Gerline

but per contra, despite submitting

undertaking, the complainant

obtained claim from marine

insurance and settled the claim at

50%. Since the complainant had

already settled the claim with marine

policy, he is not entitled to get any

claim from OP2. Moreover, Central

Warehouse Corporation is not liable

by virtue of clause 4. The Doctrine of

Double Insurance is not applicable.

Both the parties did not incorporate

contribution clause. Moreover, OP2

kept good under statutory provision

not because of any contract with

complainant. OP2 is appointed by

the Customs under Section 57 of the

Customs Act, 1962, as Public

Warehouse for keeping the goods

which are subject to customs

clearance. The complainant

imported total 5000 MTs of Pakistan

sugar and the said record was

getting cleared by customs step by

step in lots and the last lots of said

goods 1881 MT sugar were not

cleared by them.

16. OP2 admits that it had realised

the charges not at the time of deposit

of goods but at the time of delivery

and in the instant case too, by virtue

of receipt dated 03.06.1999, the OP2

only raised bills in pursuance of

condition printed at the right hand top

of the said receipt and the said

charges were realised on

31.08.1998, subsequent to

09.06.1998, and therefore, at the

time of advent of cyclone, there was

no consideration passed by the

complainant to OP2 to make a

concluded contract. OP2 has to pay

the damages on pro rata basis and

OP2 does not obtain insurance cover

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on behalf of any of its clients,

including the complainant as the OP2

got insured its interest of

warehouse, not its clients and

whenever a loss is caused to the

goods at any point of time, the said

loss is paid on pro-rata basis to all

whose goods were kept and

damaged. It was also argued that in

case of insurance claim, the CWC

simply transfers the claim of the

insurance company and it is the

insurance company which is to

appoint a Surveyor and assess the

loss of the complainant and whatever

amount the insurance company

decides to approve, the OP2

receives the same from the

insurance company and again re-

transfers to individual

claimant/complainant or the charges

on pro rata basis. Thus, the OP2 is

merely a conduit between the insurer

and the complainant and it cannot be

made liable for the claim of the

insurance. There is no privity of

contract between the complainant

and OP2. OP2 is merely the Bailee

of the Customs and does not

represent the Bailor. It was

submitted that mere receipt of a

premium does not give rise to a

concluded contract of insurance as

per ratio propounded in (1) M/s.

Marthi Crystal Vs. Oriental Insurance

Co. Ltd. , AIR 2001 Mad, 288 and (2)

Saleh Md. Vs. Ramrattan Tiwari, AIR

1924 Nag 156. Moreover, there is

negligence on the part of the

complainant itself. There was no

water proof packaging and it did not

invoke Section 23 of the Customs

Act, 1962 for remission of Custom

Duty. Again, Customs is not a party.

17. We find it extremely difficult to

countenance these contentions.

First of all, we will decide the

question whether the complainant is

a stranger to the contract of

insurance. The OP2 obtained

insurance services from OP1 for the

benefit of complainant and other

parties, whose goods were being

kept there. Secondly, premium was

paid by the complainant in advance

to OP2. OP2 in its written statement

clearly mentions about it.

Consequently, the complainant is a

“consumer”. The privity of contract

stands established between the

complainant and OP1 due to

agreement entered into between

OP1 & OP2. OP1 is jointly and

severally liable with OP2, qua the

complainant. This was never denied

that the complainant had paid

portion of total insurance policy, the

suppression of relevant provisions of

insurance policy, the missing

representation and the admitted non-

payment itself, constitute a deficiency

in service on the part of OP1. In Shri

Laxmi Cotton Traders Vs. CWC &

Ors., III 1996 CPJ 22 (NC) same

view was taken.

18. We are of the considered view

that ‘Doctrine of Contribution’ is

applicable in this case. The entire

policy must be read holistically. We

cannot rely upon one part and

ignore the others, in favour of the

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insurance company and to the

detriment of the complainant. Clause

11 of the insurance policy provides

for Contribution as well as rateable

proportion of such loss or damage.

Clause 3 of the Special Conditions

further provides that it will cover the

risk of cyclone as well. In view of

these clauses, Clause 4 of the

insurance policy pales into

insignificance. Other Clauses will

prevail over Clause 4. Moreover,

relevant clauses of the Fire Policy

were never disclosed.

19. OP1 wants to have the benefit

of both the worlds. It has accepted

premium in the sum of Rs.3.90

crores paid by the OP2 for all the

persons whose goods were kept

there, and on the other hand, it does

not want to compensate the

complainant on frivolous grounds.

Moreover, the privity of contract

stands established with the following

facts which cannot be skimmed over.

(1) The cash receipt dated

03.06.1998, issued by OP2 to M/s.

V.Arjoon, Forwarding and Clearing

Agents, for the complainant

indicating, inter alia, the insured

charges paid by the complainant to

OP2 and also the Warehouse

charges paid by the complainant to

OP2 and the acknowledgement of

stocks of sugar issued by OP2 to

M/s.V.Arjoon, Forwarding & Clearing

Agents for the complainant and

delivery of these stocks (2) letter

dated 09.06.1998 addressed by OP

to M/s.V.Arjoon, Forwarding &

Clearing Agents, wherein it is

confirmed “Cargo stored in our

warehouse at Kandla is insured with

the United India Insurance Co. Ltd.,

under ‘All India Floater Policy’,

taken by our office, CWC, New

Delhi. The insurance is for flood, fire,

theft, cyclone, burglary, etc. (3) The

claim submitted by the complainant

through its Consultants, addressed

to OP2, dated 07.09.1998. (4) The

revised bill dated 10.09.1998, given

by OP2 to M/s.V.Arjoon, to the

account of the complainant, in the

sum of Rs.3,87,178/- being the

dumping and destruction expenses.

(5) Corresponding evidence which

forms part of Annexure C-1, are (a)

Letter dated 25.11.1998, wherein

OP2 admits that “consignment is also

insured under marine policy”, (b)

letter dated 21.12.1999, addressed

by OP2, admits that “your claim is

being processed at our Regional

Office/Corporate Office. There are

other letters, dated 27.01.199,

28.01.1999, 03.03.1999, 09.04.1999,

01.05.1999, 12.05.1999, 02.06.1999,

11.06.1999, 25.08.1999, 09.09.1999,

06.10.1999, 15.12.1999,

27.01.2000, which show that OP2

took up the matter with OP1. There

is a letter dated 08.03.1999 written

by the complainant to OP2. The

relevant para of which runs as

follows:-

“We refer to your letter

under captioned and hereby

undertake that we will not take the

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subject claim from our Marine

Insurance Company and that at the

time of payment of claim to us we

shall furnish an indemnity bond to

this effect to the Central

Warehousing Corporation.

We trust you will find the

above in order and expedite

settlement of our claim at the

earliest, especially when the same

has been pending with you since

September, 1998 and similar claims

of other parties, to our knowledge

have already been settled, needless

to reiterate/highlight the financial

hardship being experienced by us

due to delay in settlement of our

claim”.

20. The learned counsel for the

OP submitted that it has breached

the undertaking given by the

complainant. It has recovered

compensation to the extent of 50%.

It was contended that the

complainant is not entitled to any

further compensation in view of the

above said undertaking.

21. We do not locate substance in

these arguments. This case is

pending before this Commission for

the last thirteen years. Despite

giving this undertaking, there lies no

rub in pursuing the matter with the

marine company. The complainant

has not got reimbursement of a

single paisa from the OPs. The

undertaking was given on

08.03.1999. We find considerable

force in the submission made by the

counsel for the complainant that the

complainant acted in the best

interest of the OPs by claiming both

from the marine insurer and from the

OPs, in order to reduce the burden of

OP1. Moreover, according to

insurance law, the assured has the

right to persuade both the insurers

on the basis of equity because it has

paid the premium to two insurers and

the two insurers must share the

burden equally. The complainants

are bound to claim in law, the

rateable interest from both the

policies.

22. So far as Marine Insurance is

concerned, Section 34 of the Marine

Insurance Act, 1963, provides as

follows:-

“(1) Where two or more policies are

effected by or on behalf of the

assured on the same adventure and

interest or any part thereof, and the

sums insured exceed the indemnity

allowed by this Act, the assured is

said to be over-insured by double

insurance.

(2) Where the assured is over-

insured by double-insurance:-

(a) the assured, unless the policy

otherwise provides, may claim

payment from the insurers in such

order as he may think fit, provided

that he is not entitled to receive any

sum in excess of the indemnity

allowed by this Act;

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(b) where the policy under which the

assured claims is a valued policy, the

assured must give credit as against

the valuation, for any sum received

by him under any other policy,

without regard to the actual value of

the subject-matter insured;

(c) where the policy under which the

assured claims is an unvalued policy

he must give credit, as against the

full insurable value, for any sum

received by him under any other

policy;

(d) where the assured receives any

sum in excess of the indemnity

allowed by this Act, he is deemed to

hold such sum in trust for the

insurers, according to their right of

contribution among themselves”.

23. In an English case, reported in

National Employees Mutual General

Insurance Association Ltd. Vs.

Haydon 1980 2 Lloyds Law Reports

149. The facts of this case were :

The Policy stated :

“This policy does not indemnify the

insured in respect of any claim made

against him (i) for which the Insured

is or would but for the existence of

this Policy be entitled to indemnify

under any other Policy except in

respect of any excess beyond the

amount payable by such Policy

…….”.

It was held :

“4. Each policy was to be looked at

independently and if each would be

liable but for the existence of the

other, then the exclusion clauses

were to be treated as cancelling each

other out and the plaintiffs and

defendants were liable on the

policies and the plaintiff was entitled

to a contribution”.

It was also held :

“In my judgment, this case turns on

the construction of the two policies

as a whole and in particular of

general exception (i) in the NEM

policy and general exclusion 5 (b) (iii)

in the master policy. If those two

clauses are indistinguishable in their

effect, as the Judge thought, I would

agree with him that, like Mr.Justice

Rowlatt in Weddell’s case, the Court

should invoke the equitable principle

of contribution between co-insurers

to avoid the absurdity and injustice of

holding that a person who has paid

premiums for cover by two insurers

should be left without insurance

cover because each insurer has

excluded liability for the risk against

which the other has indemnified him.

But I accept Mr.Irvine’s submission

that the two clauses we have to

consider are clearly distinguishable

from each other, and that on their

true construction the solicitors are

covered by the NEM policy and not

by the master policy against the

Glover claim. Whether these clauses

are rightly labelled exceptions or

exclusions does not, in my opinion,

matter. The question is, what in each

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case is covered by these policies

read as a whole, including these

clauses”.

It was further held :

“…. In the case of double insurance

an exemption clause will not be

allowed to deprive the insured of the

benefit of both policies. The insured

was only entitled to recover 50%

under one policy because there was

a rateable proportion clause which

reduced the liability under that policy

in the event of another insurance

policy existing at the date of the

accident, as it did”.

24. Again, in another English case,

in reference, the Court of Appeal in

case, Commercial Union Assurance

Co.Ltd. Vs. Hayden, [1977] Vol.I] 13,

held :

“Where a man has made a double

insurance, he may recover his loss

against which of the underwriters he

please, but he can recover for no

more than the amount of his loss……

It being thus settled, that the insured

shall recover but one satisfaction,

and that in the case of double

insurance, he may fix upon which of

the underwriters he will for the

payment of his loss, it is a principle of

natural justice that the several

insurers should all of them contribute

in their several proportions, to satisfy

that loss against which they have all

insured”.

25. Similar view was taken in (1)

Legal and General Assurance

Society Ltd. Vs. Drake Insurance

Co.Ltd., [1984 L. No.1495], I.Q.B.

887, (2) British Telecommunications

PLC & Ors. Vs. Caledonia North Sea

Limited & Ors., UKHL/0029/2002 and

(3) Drake Insurance PLC Vs.

Provident Insurance PLC,

UKCM/0001/2003.

26. Generally, the rule applicable is

that a Tribunal is endowed with such

ancillary and incidental powers to

discharge its functions. The Hon’ble

Supreme Court in Grindlays Bank

and Central Government Industrial

Tribunal, AIR 1981 SC 606, went on

to hold that by rule of statutory

contribution, a Tribunal is endowed

with such ancillary and incidental

powers as necessary to discharge its

functions effectively for the purpose

of doing complete justice between

the parties.

27. In General Assurance Society

Ltd. Vs. Sitarama Rice Mill Co. &

Ors., 1971 Comp Case 162 (Mad), it

was held :

“The contribution clause in exhibit A-

1 has been introduced only in order

to secure to the first defendant the

right of contribution wherever it

arises. The general principle is that

the assured who insures his property

cannot recover more than a full

indemnity. But for such contribution

clause, it would be open to the

assured to select the policy upon

which to claim his indemnity –if that

14

alone is sufficient for the purpose –

and the insurers upon that policy

cannot resist liability upon the ground

that there are other policies in

existence which the assured might

have enforced. (See page 415 of

Ivamy’s General Principles of

Insurance Law). At page 416 of the

same book, it is stated in order to

give rise to a right to contribution the

following conditions must be fulfilled:

1. All the policies concerned must

comprise the same subject matter.

2. All the policies must be effected

against the same peril. 3. All the

policies must be effected by or on

behalf of the same assured. 4. All the

policies must in force at the time of

the loss. 5. All the policies must be

legal contracts of insurance. 6. No

policy must contain any stipulation by

which it is excluded from

contribution. In dealing with the

conditions giving rise to right of

contribution, it is stated in paragraph

528 at page 267 of Halsbury’s Laws

of England, third edition, volume 22,

that each policy must cover the same

interest in the property and the

principle is explained in the following

passage:

“Each policy must cover the same

interest in the same property, that is

to say, each policy must be intended

to protect the same assured against

the same loss. The policies must,

therefore, cover a common interest; it

is not sufficient that they cover the

same property. Where separate

insurances are effected upon the

same property by different persons

interested in it for the purpose of

protecting their separate interests

only, there is no contribution. Thus,

there is no contribution when

separate policies are effected by

bailor and bailee, by mortgagor and

mortgagee or by landlord and tenant

for their individual protection. Where,

however, one of the policies is

intended to ensure for the benefit of

both persons interested, as, for

instance, where the bailee,

mortgagor or tenant intends to cover

the interest of his bailor, mortgagee

or landlord as well as his own, a case

of contribution arises between such

policy and any policy effected by the

bailor, mortgagee, or landlord for his

separate protection, since both

policies, in fact, cover a common

interest, namely, the interest of the

bailor, mortgagee or landlord”.

28. The learned counsel for the

Complainant has invited our

attention to (1) Contship Container

Lines Limited Vs. DK Lall & Ors.,

(2010) 4 SCC 256, (2) New India

Assurance Co. Ltd. Vs. Priya Blue

Industries Pvt. Ltd., (2011) 4 SCC

231, (3) Oriental Insurance Co. Ltd.

Vs. Ozma Shipping Co. & Anr.,

(2009) 9 SCC 159.

29. In view of the facts and

circumstances of this case, no

liability can be fastened upon OP2.

However, instead of helping the

complainant, it supported the OP1.

Why did OP2 work in cahoots with

OP1? On the other hand, the OPs

15

compelled the complainant to give

the undertaking that they would not

claim any amount from the Marine

Policy as they would compensate it

completely, on the other hand, OPs

want to shirk from paying 50% of

the loss.

30. The whole gamut of above said

facts and circumstances leans on the

side of the complainant. We,

therefore, direct the OP1 to pay 50%

of the total loss of

Rs.2,06,86,406.24ps with interest @

9% p.a. from the date of filing of this

complaint, i.e. 07.06.2000, till

realisation of the decreetal amount,

to the complainant. Compensation

for mental agony and harassment, in

the sum of Rs.50,000/- is also

granted, payable by OP1, to the

complainant, within 45 days, failing

which it will carry interest at the rate

of 9%, p.a., till realisation.

…………………………...

(J.M. MALIK, J.)

PRESIDING MEMBER

…………………………...

(VINAY KUMAR)

MEMBER

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