On May 2, 2022, a full bench of the Supreme Court of India (“SC”) allowed an appeal filed by United India Insurance Co. Ltd. (“UIIC”) against the order of the National Consumer Disputes Redressal Commission (“NCDRC”), directing payment of INR 7.48 crores against the insured’s fire insurance claim of INR 12.2 crores. The Court set aside the NCDRC’s decision on the basis that the same loss had been insured and paid out by a foreign insurer – under a policy obtained by the insured’s parent company. After due consideration of the facts, the Court determined that this was a case of ‘double insurance’.
In India, Section 34 of the Marine Insurance Act, 1963 (“MIA”) describes ‘double insurance’ as a scenario where two or more insurance policies are effected by or on behalf of the insured on the same interest (or a part of such interest). In these cases, the insured may claim payment from insurers in the order it deems fit, unless provided otherwise in the policy – such as through ‘other insurance clauses’ which limit/exclude coverage or provide coverage only in excess, in case the same risk is covered by another policy.
In other common law jurisdictions, including the UK and Canada, the established practice is that if two insurance policies (which would otherwise cover the loss) contain a clause which excludes the cover in presence of another policy, the two exclusion clauses in the respective policies will cancel each other out, since the unreasonable alternative would be that neither policy would respond in the event of a claim. Therefore, the insured can claim the entire loss under either policy but in view of the double insurance, the liability is ultimately shared rateably between the insurers.
In this article, we briefly discuss the SC’s judgment, which sheds light on the concept of double insurance in India.
Levi Strauss (India) Pvt Ltd (“Insured”) procured a Standard Fire and Special Perils (“SFSP”) Policy from UIIC to cover stock in storage, while the Insured’s foreign parent company obtained a Stock Throughput Policy (“STP”) from Allianz Global Corporate & Speciality SE (“Allianz”) to cover stocks of all its subsidiaries (including the Insured) for a sum insured of USD 10 million in case of any one vessel or conveyance, and USD 50 million in any one location. During subsistence of both policies, fire broke out in the Insured’s warehouse causing damage to its stocks. UIIC repudiated the Insured’s claim stating that Condition 4 of the SFSP policy excluded liability for “any loss or damage to property which, at the time of the happening of such loss or damage is insured by or would, but for the existence of this policy, be insured by any marine policy…”.
Under the STP policy (obtained by the Insured’s parent company in the US), Clause 47 provided that where the insured entities are obligated by legislation or otherwise to arrange insurance locally, they will continue to have the full benefit of these insurances in respect to difference in perils insured, definitions, conditions and/or limits of liability. Clause 41 of the STP policy, inter alia, stated that in case the interest insured is covered by other insurance, the loss should be collected from the several policies in the order of the date of their attachment.
The Insured challenged UIIC’s repudiation of the claim before the NCDRC, alleging that (a) it was obligated, under the erstwhile Section 25 of the General Insurance Business (Nationalization) Act, 1972 (“GIBNA”), to obtain a policy issued by a domestic insurer, and that as a consequence, the condition in Clause 47 of the STP policy was met; and (b) repudiation on the ground that the risk was covered by the global insurance policy was contrary to Clause 41 (on ‘other insurance clauses’) of the STP policy.
On a consideration of Clause 47, the NCDRC held that to the extent that the insured risk was covered by the domestic policy, coverage by the STP policy stood excluded. There was difference in the perils insured, the conditions and/or limits of liability under the domestic policy and the STP policy. Therefore, the loss of profit which the Insured would have earned upon sale of the destroyed goods was payable by Allianz, whereas loss corresponding to the cost of those goods were to be reimbursed under the domestic policy by UIIC.
UIIC appealed to the Supreme Court of India, inter alia, claiming that: (a) the STP policy covered the fire risk in question as it was applicable to goods whilst in transit and/or in store or elsewhere, including whilst at retail locations; (b) the NCDRC’s order erroneously interpreted terms of the SFSP policy and the STP policy to hold that loss caused to goods was covered by the SFSP policy, and loss of earnings was covered by the STP policy.
The judgment highlights the need for insurance carriers and the insured, alike, to review global insurance programs with the intent of achieving clarity on interworking of various insurance policies, for avoiding overlap of insurance coverage, or ambiguities at the time of claims. A key consideration is whether any governmental or regulatory approval requirement is triggered, if risks arising in or connected with India are to be covered under a global policy issued by a foreign insurer to the parent of an Indian entity outside India. The bigger issue is that this judgment appears to have raised some doubts over the clear and unequivocal position that India is an admitted jurisdiction, and all Indian risks must be insured with registered insurers in India. Perhaps, the Indian insurance regulator may consider this is as a suitable subject for offering guidance to insureds and the wider insurance sector.
 Ref: Weddell v Road Transport & General  2 K.B. 563; and National Employers Mutual General Insurance Association Ltd. v Hayden  2 Lloyd’s Rep. 235
 Ref: TD General Insurance Company v Intact Insurance Company 2019 ONCA 5; and Family Insurance Corp. v. Lombard Canada Ltd.  2 S.C.R.
 Peacock Plywood Pvt Ltd v The Oriental Insurance Co Ltd 2006 Supp (10) SCR 140; United India Insurance Co Ltd v Great Eastern Shipping Co Ltd 2007 (9) SCR 350; and New India Assurance Co Ltd v Hira Lal Ramesh Chand and Ors 2008 (10) SCC 626
 Section 4 of the Marine Insurance Act, 1963 states: “4. Mixed sea and land risks.—(1) 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…”
This article was originally published in Mondaq on 18 July 2022 Co-written by: Shailaja Lall, Partner; Uday Opal, Principal Associate; Shubham Chauhan, Associate. Click here for original article
Contributed by: Shailaja Lall, Partner; Uday Opal, Principal Associate; Shubham Chauhan, Associate
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