Supreme Court: In a case relating to double insurance, the 3-Judge Bench comprising of Uday Umesh Lalit, S. Ravindra Bhat* and Pamidighantam Sri Narasimha, JJ., reversed the impugned order of National Consumer Disputes Redressal Commission (NCDRC) which allowed the insurance claim of Levi Strauss (India) Pvt. Ltd. which was repudiated by the insurer. The Bench opined,
“Levi could not claim more than what it did, and not in any case, more than what it received from Allianz.”
The United India Insurance Co. Ltd. (insurer) had issued a Standard Fire & Special Perils Policy (SFSP Policy) to Levi, covering Levi’s stocks while in storage for the sum of Rs. 30 crores. Meanwhile, the parent company of Levi (Levi Strauss & Co.) had obtained a global policy from Allianz Global Corporate & Specialty (Allianz) covering stocks of all its subsidiaries, including Levi. The coverage through this stock throughout policy (STP Policy) was for $10 million in any one vessel or conveyance, and $50 million in any one location. The parent company also got another “all risks” policy (AR Policy) issued by Allianz covering the stocks of its subsidiaries throughout the world being commercial lines policy. The limit of liability of the AR Policy was up to $ 100 million.
Repudiation of Claim
During subsistence of all these policies, a fire broke out in one of the warehouses containing Levi’s stocks. Levi claimed Rs. 12.20 crores from the insurer. However, the insurer repudiated the claim stating that it was not liable to indemnify the insured in view of the policies issued by Allianz, since Condition 4 in the SFSP Policy clearly stated that the fire policy issued by it excluded liability in respect of property covered by marine policy.
The insurer’s defence was that the SFSP Policy did not cover any loss or damage to the property which at the time of the happening of such loss or damage was insured, by any marine policy or policies.
Findings of NCDRC
On a consideration of Clause 47 of the STP Policy, the NCDRC held that to the extent of the insured risk being covered by the domestic policy, coverage by the STP Policy stood excluded. Therefore, the NCDRC concluded that the loss of profit which Levi would have earned on sale of the damaged/destroyed cost was payable to it by Allianz, whereas the loss suffered by Levi to the extent of the cost of those goods would be reimbursable under the domestic policy issued by the insurer. After noting that Levi had received $4.54 million (Rs. 19.52 crores); the claim was allowed to the extent of Rs. 1.78 crores.
Was the STP Policy a Marine Policy?
Section 4 of the Marine Insurance Act, 1963 clarifies that a contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. Similarly, in Peacock Plywood Pvt. Ltd. v. Oriental Insurance Co. Ltd, 2006 Supp (10) SCR 140, and United India Insurance Co. Ltd. v Great Eastern Shipping Co. Ltd., 2007 (9) SCR 350, it was held that warehouse risks, combined with voyage and other marine risks, are part of marine insurance policies in India.
Further, in the instant case, the first two recitals of the STP Policy, as well as the warehouse-to-warehouse transit (Clause 6) and other stipulations clearly stated that the policy covers both marine and other risks. In fact, the STP describes itself as “Open Marine Insurance Contract”.
Hence, the Bench held that the STP Policy was a marine policy which comprehensively covered voyage, transit, transportation and warehouse perils. Even otherwise, the insurance cover clearly and unequivocally included marine perils, making it a marine cover.
Condition 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 Levi (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 Export Credit Guarantee Corporation of India Ltd. v. Garg Sons International, (2014) 1 SCC 686, it had been held that, “the insured cannot claim anything more than what is covered by the insurance policy. The terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely. The clauses of an insurance policy have to be read as they are.”
Hence, the Bench held that on a plain and reasonable construction of Condition 4 of the SFSP policy, once it is established that Levi – or 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, Condition 4 operated to exclude the insurer’s liability.
Double Insurance – Overlapping policies
Noticeably, as against the claim of Rs. 12.2 crores made upon the insurer, Levi ultimately received equivalent of over Rs. 19 crores from Allianz and yet kept seeking damages form the other insurer, therefore, the Bench observed,
“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.”
The Bench opined that a contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less and 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. Reliance, in this regard was placed on the Court on the opinion of Brett LJ in Castettion v Preston, (1833) 11 QBD 380, wherein he said that:
“The contract of insurance … is a contract of indemnity, …, and this contract means that the assured, in the case of a loss …, shall be fully indemnified, but shall never be more than fully indemnified.”
In the light of above, the Bench held that Levi could not claim more than what it did, and not in any case, more than what it received from Allianz. Its endeavour to distinguish between the STP Policy and the SFSP Policy, i.e., that the former covered loss of profits, and the latter – the value of manufactured goods; is not borne out on an interpretation of the terms of the two policies.
Since, Levi had already received substantial amounts towards the sale price of its damaged goods, over and above the manufacturing costs, the Bench allowed the appeal and set aside the impugned order.
[United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., 2022 SCC OnLine SC 537, decided on 02-05-2022]
*Judgment by: Justice S. Ravindra Bhat
For the Appellant: A.K. De, Advocate
For the Respondent: Joy Basu, Senior Advocate