In a recent ruling by the National Consumer Disputes Redressal Commission, the appeal made by the Appellant against the Respondent in a marine insurance classification dispute has been dismissed. The case involves a complex situation where the Appellant failed to comply with the vessel’s classification requirements, leading to a dispute over insurance coverage. Dive into the details of this legal battle between the Appellant and the Respondent to understand the implications of this judgement.
Facts
- The National Consumer Disputes Redressal Commission (NCDRC) dismissed the consumer complaint filed by the Appellant.
- The Appellant’s vessel was over 25 years old at the time of the incident and was not classed as ‘I.R.S.’ as required.
- The Appellant had provided all necessary details about the vessel to the insurance company after obtaining the Cover Note.
- The shipowners engaged the services of Salvors to recover the cargo, leading to arbitration proceedings.
- A collision occurred between the Appellant’s vessel and a navy vessel near Mumbai Port, leading to a maritime lien by Salvors.
- The GAA issued a guarantee for General Average contributions, but the Respondent did not issue the required salvage security.
- The Respondent later withdrew the General Average Guarantee citing non-compliance with the Institute Classification Clause (ICC) in the Marine Insurance Policy.
- Arbitration resulted in an award against the Appellant and other cargo owners for reimbursing Salvors’ costs.
- A legal notice was sent to the Appellant, but its requests for settlement remained unanswered.
- The vessel’s details were communicated to the Respondent and its brokers by the Appellant before the voyage.
- The Marine Insurance Policy covered all risks as per the Institute Cargo Clauses (A), Institute War Clause, and Institute Strike Clause.
- The vessel carrying steel coils experienced crane failure during discharge at Mumbai Port, leading to the grounding incident.
- The Appellant notified the Respondent of a potential claim under the Marine Insurance Policy after learning about the vessel running aground.
- Communication indicated that the vessel had lost its classification with Lloyd’s Register of Shipping, raising concerns of non-compliance with ICC.
- The Appellant requested the Respondent to issue salvage security and settle the incurred losses, providing vessel details and arbitration award documentation.
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Arguments
- The Appellant argued that they were not privy to the unseaworthiness of the vessel.
- It was contended that indemnification by the Respondent should not depend on the amount of loss caused or the nature of the accident.
- The Appellant distinguished the case of Everbright based on the issuance of the policy following the open cover-note in Kam Hing.
- The Appellant disagreed with the interpretation of ‘I.R.S.’ by the NCDRC and stated that the vessel was classified with the ‘International Register of Shipping’.
- Referring to the Institute Marine Cargo Clause, the Appellant argued that the Respondent could only deny indemnification if the Appellant was aware of the unseaworthiness.
- The Counsel argued that the insurer is not burdened with discovering non-compliant vessel information and that issuance of a cargo policy does not imply approval of vessel class.
- It was emphasized that the Appellant, as a cargo-importer, provided all vessel particulars as received from the Overseas Seller.
- Respondent began investigating the seaworthiness of the vessel after the collision.
- The Respondent argued that they are not estopped from claiming breach of the ICC despite providing General Average Guarantee in good faith.
- The official acronym ‘I.R.S.’ refers to Indian Register of Shipping, not the International Register of Shipping as claimed by the Appellant.
- The Appellant failed to disclose that the vessel’s classification by Lloyd’s Register of Shipping was withdrawn.
- The Respondent highlighted that the Appellant did not submit the certificate proving ‘I.R.S.’ classification of the vessel to the Respondent or the NCDRC.
- The priority during the General Average Guarantee process was to mitigate losses by saving cargo.
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Analysis
- The Appellant committed breach of warranty by failing to comply with the classification requirement of the International Association of Classification Societies (IACS).
- The concept of waiver in marine insurance requires knowledge and unequivocal representation from the insurer, which were absent in this case.
- The Respondent did not waive the breach of warranty regarding the vessel’s classification requirement.
- The issuance of the General Average Guarantee did not imply a waiver of the breach of warranty.
- Prompt notification to underwriters about non-compliance with classification requirements is crucial for insurance cover.
- The ICC 01/01/2001 enforces strict classification standards to ensure seaworthiness of vessels.
- The insurer’s liability is automatically discharged upon discovering a breach of warranty.
- Knowledge of breach and explicit representation by the insurer are essential for waiver of warranty.
- Compliance with the ICC is a significant factor influencing underwriter decisions regarding insurance cover.
- The cover note was issued by Wilcom on behalf of the insurer on 9.5.1997 before the particulars of the carrying vessel were declared.
- The insurance policy was to be issued once the vessel was on the way to the port of discharge.
- The ship, later discovered to be a ‘phantom ship’ operated by criminals, was declared as ‘HSR-100A1’ on 2.7.1998.
- The ‘held covered’ clause in insurance contracts cannot be invoked if it would have been impossible to insure the risk at a reasonable commercial rate.
- The obligation to disclose the vessel’s classification was found to be a continuing obligation even after the policy had been issued.
- The Singapore Court of Appeal upheld the repudiation in the case involving wood logs shipment.
- The High Court of Hong Kong emphasized the importance of the ICC classification requirement and held that it is a central condition of the insurance.
- In cases where the carrying vessel declared is unclassified, the ICC may not apply, and insurers may repudiate claims based on this.
- The High Court of Hong Kong rejected the argument that facultative insurance covers would exempt vessels from ICC classification requirements.
- Prompt notification of vessel classification information is crucial, as demonstrated in various court cases about insurance claims.
- The ICC aims to ensure that vessels meet certain standards of seaworthiness and maintenance, which are indicated by their classification under recognized international classification societies.
- The insured’s obligation to disclose non-classed vessels under the ICC 01/01/2001 was upheld by both the Singapore Court of Appeal and the High Court of Hong Kong.
- A warranty in marine insurance means a promissory warranty by which the assured undertakes that a particular thing shall or shall not be done, or a condition shall be fulfilled
- A warranty, whether express or implied, must be exactly complied with, regardless of its materiality to the risk
- Non-compliance with a warranty may be excused if the circumstances change or compliance is rendered unlawful by subsequent law
- The insurer is discharged from liability from the date of the breach of warranty, but any liability incurred before that date remains
- The assured cannot claim that a breach of warranty has been remedied or complied with before the loss occurs
- A breach of warranty may be waived by the insurer
- The Appellant repudiated the claim of the Respondent
- The Appellant committed breach of warranty
- The breach of warranty was not waived by the Respondent
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Decision
- The judgement of the NCDRC regarding the impugned case has been confirmed.
- The appeal made by the party has been dismissed.
- The decision of the NCDRC stands as conclusive in this matter.
Case Title: M/S.RAJANKUMAR AND BROTHERS (IMPEX) Vs. ORIENTAL INSURANCE CO.LTD. (2020 INSC 146)
Case Number: C.A. No.-000971-000971 / 2014
