NCDRC | What are the obligations of the insured taking a Marine Insurance Policy? Principle of Utmost Good Faith favours whom? Commission delineates

National Consumer Disputes Redressal Commission (NCDRC): Anup K. Thakur (Presiding Member) dismissed a consumer complaint against the insurance company in case of a Marine Cargo Specific Voyage Policy, holding that it was for the insured/complainant to ensure full compliance of all the policy conditions in its own interest and that the principle of utmost good faith in the present case favoured the insurance company strongly.

Complainant, Mauria Udyog Ltd. and Jotindra Steel & Tubes Ltd. purchased marine cargo-specific voyage insurance policy from United Insurance Co. Ltd., Noida (OP-1) and facts in both the cases are identical.

Issue for Consideration:

Whether the OP had committed any deficiency in service by withdrawing the guarantee and impliedly, denying the insurance claim on the ground that the Marine Vessel (M.V )was not a classified M.V ad did not satisfy the condition mentioned in the policy viz. “Institute Classification Clause with deletion of held cover provision”.

Bench stated that both parties claimed that they had acted in good faith.

OP’s case was that it depended entirely on the information furnished by the insured to issue the policy and when it came to know that the M.V. was not a classified M.V., it immediately withdrew the guarantee it had extended to the adjusters and informed the complainant.

Complainant, on the other hand, argued that it supplied information on the M.V. when it came to it’s knowledge as it was only one of the importers of cargo, on CIF basis, it had no means of knowing the classification of the vessel any sooner. Further, it was not it’s responsibility alone to have ascertained the classification of the M.V. and the implied seaworthiness or otherwise. OP too could have and should have ascertained the M.V.’s classification status, as per it’s own internal circulars. That the OP singularly failed to do so was a deficiency in service and the complainant should not have to suffer repudiation of its genuine claim on this account.

Insurance contract is a contract of utmost good faith, as laid down by the Supreme Court.

CRUX:

Whether the principle of good faith was violated?

Bench on perusal of the records found that M.V. was old and that at the time of it’s engagement in the instant case, it was not classed with any approved society under the International Association of Classification Societies (IACS).

This finding of the surveyor has not been disputed. Indeed, complainant’s argument has remained confined to claiming that it was not as if the vessel was not classified at all; rather, it was listed in the International Register of Shipping. OP has, on the other hand, firmly held that the vessel was not classified as required by the policy clause “Institute Classification Clause with deletion of held cover provision”. Indisputably, therefore, it can be safely concluded that as per OP’s policy clause, the vessel was not worthy of being insured. Yet, it was.

Should the OP have insured the complainant’s cargo, without full knowledge of the vessel and its classification?

Bench held that the complainant failed to establish it’s case.

Reasoning:

It was the complainant, the importer, who had purchased the insurance cover. It was, therefore, reasonable that it had to be vigilant about all the conditions of taking an insurance cover.

The complainant, a regular importer, ought to have known the terms and conditions accompanying a Marine Cargo Specific Voyage Policy.

Although was for the OP to do the necessary due diligence on the classification of the vessel, but, It was the complainant whose cargo was to be insured against all risks associated with the marine voyage. It was therefore for the complainant to have ensured full compliance of all the policy conditions, in it’s own interest.

Hence, merely a cover note, with details of vessel and voyage left blank, on “To Be Declared” basis, from the OP-insurance company, could not have meant that the complainant could then have assumed the contract of insurance as complete and taken no further steps other than a mere communication of details of the shipment, including the vessel’s name, to the OP.

Bench, however, added that it was unreasonable for the OP insurance company to proceed on good faith and issue the insurance policy, in the hope that all the terms and conditions would be complied with, if and when a claim were to be filed.

OP displayed the good faith in issuing the insurance policy, leaving the box in the policy schedule blank.

Utmost Good Faith

The principle of utmost good faith, in the instant case, favours the OP strongly. It was the complainant’s responsibility, first and foremost, to have kept the OP fully apprised of the classification status of the M.V. as soon as it came to know.

In view of the above discussion, the instant consumer complaint was dismissed. [Mauria Udyog Ltd. v. United India Insurance Company Ltd., 2021 SCC OnLine NCDRC 16, decided on 28-01-2021]