National Insurance Co. Ltd. directed to pay 72.5 lakhs to a marine service provider company for loss of a ship

National Consumer Disputes Redressal Commission

National Consumer Disputes Redressal Commission (NCDRC): NCDRC has dismissed an appeal filed by an insurance company challenging the order of Gujarat State Consumer Disputes Redressal Commission, vide which the Insurance Company was directed to pay Rs.72,50,000/-  with 6% interest from date of filing of a claim, for the loss to the ship, as per the policy terms to a marine service provider company. In the present case,  MV.TIMO ship of Atlantic Shipping Services was insured for Rs.72,50,000/- with National Insurance Co. Ltd. from 22.09.2004 to 21.09.2005 under the hull and machinery policy. Said ship sank on 1.11.2004 while going from Blackberry Port to Anchord Buranted. The ship was carrying 845 MT of iron ore fines. When Atlantic Shipping Services approached the Insurance Company to settle the claim, the Insurance Company repudiated the claim on the basis that no peril of the sea operated and that the loss of the vessel was caused by fatigue failure, which was caused by normal wear and tear.  Atlantic Shipping Services then filed a consumer complaint before the State Commission, which accepted the complaint and directed the insurance Company to settle the insurance claim. Before NCDRC, insurance company alleged that according to the surveyor M.V.TIMO ship broke down from the middle with a cracking sound and it was due to fatigue of the hull and body of the ship which has nothing to do with the peril of the sea. The ship was built in the year 1958 in Italy and was quite old and has completed his life.  After perusing the material on record, Commission observed that there is no doubt that the ship in question was traveling on said route quite regularly and the load of the ship was less than the load capacity of the ship. When the ship was insured, the Insurance Company must have done their inspection about the hull, body and machinery of the ship. Even for this journey, the certificate of sea worthiness was issued by the competent Authority. Even then the ship sank in the mid waters of the sea.  This shows that the sinking of the ship has to do something with the sea itself.  Had the ship been overloaded, cracking of the hull and body due to fatigue would seem reasonable and probable. While noting that, “the ship has broken down amidst mid waters of the sea and the ship was not brought out of the sea and final survey report was not available, there is no alternative but to believe that the ship broke down due to peril of the sea. One of the perils covered is ‘Bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull.’ As the wreckage has not been physically examined by the surveyor, the operation of this peril also cannot be ruled out. Hence, we are of the view that the complainant is entitled to insurance amount under the policy,” NCDRC dismissed the appeal of the Insurance Company. [Atlantic Shipping Services v. National Insurance Co. Ltd., 2016 SCC OnLine NCDRC 11, decided on January 4, 2016]

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