Trading warranty violation by Sailing vessel - Insurers repudiation held right - NCDRC

I had posted earlier on ‘dhows’ ……….. some of you might better know Dow Jones Industrial Average, one of the several stock market indices created by Wall Street Journal. A Dhow (Arabic) is traditionally sailing vessel primarily used along the coasts of Arabian peninsula, Pakistan, India and East of Africa. They traditionally have raised hull and a sharp pointed bow and are made of wood. In case you are still to visualise this in mind,  think of MGR - ‘Aayirathil oruvan’ & song ‘adho antha paravai pola’ – a story based on pirates at sea and plot made to release slavery and independence of labourers by Doctor MGR, protesting against the ruler of neidhal nadu. Jayalalitha played poongodi, daughter of ruler of kanni theevu.

fishing trawlers lined up at Kasimedu

Section 3(39) of the Merchant Shipping Act 1958 defines the Sailing Vessel as "Any description of vessel provided with sufficient sail area for navigation under sails alone, whether or not fitted with mechanical means of propulsion and includes a rowing boat or canoe but does not include a pleasure craft". Indian Insurers followed Marine Hull Tariff which had a special section applicable to all Sailing Vessels (Mechanised or Non-mechanised) valued upto Rs.50 lakhs. Vessels of higher value were rated independently. The Tariff  provided for insuring terms which primarily were CRO (cancellation returns only – meaning that there would be no refund for lay – up returns). The insuring terms were ITC – Hulls TLO (including salvage, salvage charges and sue and labour); incorporating P&I liabilities sub to cl 9 of ITC Hulls – Port Risks 20.7.87 or Institute Time Clauses – Hulls 1.10.83 which was on wider terms. The Tariff rating was on various trading warranties, of which the area of operation and the period of operation were essential parameters.  There were Trading warranties which prevented operation of vessel during monsoon/ specified periods.

With this background, do read this decision of National Forum in a case filed against National Insurance by a boat owner whose claim was repudiated. 

The reference is to a revision petition against the order of TN State Consumer Disputes Redressal Commission by which the State Forum had allowed the appeal of Insurers against the order of Dist. Forum, Tuticorin.  By its aforesaid order, the District Forum had allowed the complaint of the petitioner holding that the respondent Insurance Company was deficient in service in rejecting her insurance claim in respect of a cargo vessel owned by her and directed the Insurance Company to pay Rs. 5 lakh (sum assured) with interest @ 10% per annum +  Rs. 5,000 towards compensation for mental agony and suffering and Rs. 2,000 towards the cost of the proceedings, within two months from the date of the order.

The petition was in respect of sailing vessel “MSV Bennaya”, insured for 5 lakhs.   The vessel sailed from Tuticorin Port in Tamil Nadu on 8.5.2003 carrying a cargo of bricks and wooden poles, encountered cyclonic weather, was severly damaged and had to be abandoned. A ship named MV Tiger Shark rescued the crew but the abandoned vessel sank with the cargo on board.  The Surveyor appointed by Insurer, inter alia, stated that by the time of its sinking, the insured vessel had travelled to a location which was outside its permitted route under the Trading Warranty (A) specified in the insurance policy. No letter of repudiation of the claim appears to have been issued before the complaint was filed and, hence, it was alleged in the complaint that the claim had not been settled for over two years.

On considering the pleadings and evidence brought on record, the District Forum held that it was not possible to conclude that the complainant had violated the Trading Warranty  and  partly allowed the complaint directing the Insurers to pay.  The Insurers appealed against the impugned order before the State Commission seeking reference to Trading Warranty which read, “(A). Warranted vessel employed for carriage of cargo and operations connected therewith on the east coast of Sri Lanka and east coast of India not north of Visakhapatnam and not South of Palk Strait.” The State Commission further observed that as pleaded in the complaint, the vessel sailed with full cargo from Tuticorin to Port Blair, Andaman and Nicobar Islands. The State Commission also noticed that from the pleadings it was clear that the vessel ran into a cyclone in the Andaman Sea where ultimately it sank. On the basis of the admitted facts, the State Commission concluded that the insured vessel was damaged and sank at a location in the Andaman Sea, which was not within the permitted area of operation as per the Trading Warranty.

The boat owner went on appeal before the National Commission.  During the course of the hearing, Insurer’s counsel produced a copy of a map purportedly depicting the route that the insured vessel was permitted to take as per the Trading Warranty and that it actually adopted after sailing from Tuticorin Port on 8.5.2003 in order to deliver the cargo at Port Blair. Nothing was either produced or submitted by the learned Counsel for the petitioner to controvert the statement that the insured vessel sank at a location that was clearly outside the route it was permitted to take under the Trading Warranty of the policy.

The Commission observed that from a reading of the Trading Warranty, it is clear that the phrase “… … not South of Palk Strait” is inconsistent with the route showed in the map produced.  However, it was admitted in the complaint that the vessel had sailed from Tuticorin Port to deliver the cargo at Port Blair and the location where it sank due to cyclone was in the Andaman Sea. Hence, it is clear that the route adopted by the vessel was outside the permitted area under the Trading Warranty and the Insurance Company cannot be held guilty of deficiency in service in repudiating the insurance claim.  The National Forum accordingly dismissed the revision petition and affirmed the order of the State Commission.

Placed for the purpose of learning (by all of us connected with Insurance) and does not purport to be any sort of comment on the decision.

With regards – S. Sampathkumar

19th June 2014.

Citation : III (2012) CPJ 724 (NC)- NCDRC in First appeal no. 387 of 2006 decided in 2012.