Case Note & Summary
The appellant, a partnership firm importing steel coils, obtained a Marine Cargo Cover Note from the respondent insurer on 14.5.2010 for a voyage from China to Mumbai. The appellant provided vessel particulars, including its classification as 'I.R.S.' and age (built March 1985), and sought confirmation. The insurer issued a Marine Insurance Policy on 2.7.2010 covering all risks. The vessel ran aground on 18.7.2010, leading to a General Average situation. The insurer issued a General Average Guarantee on 3.8.2010 but later withdrew it on 20.8.2010, citing breach of the Institute Classification Clause (ICC) because the vessel was over 25 years old and its Lloyd's classification had been withdrawn. The insurer also failed to issue a separate salvage security, causing delay in cargo release and additional costs. The appellant filed a consumer complaint before the NCDRC, which dismissed it on the ground that the appellant failed to prove compliance with the ICC. The Supreme Court allowed the appeal, holding that the insurer had waived the ICC condition by issuing the policy without objection after full disclosure, and that the insurer's conduct in issuing and then withdrawing the guarantee amounted to deficiency in service. The Court directed the insurer to pay all losses incurred by the appellant, including salvage, demurrage, and legal costs, with interest.
Headnote
A) Insurance Law - Marine Insurance - Institute Classification Clause - Breach - The assured disclosed vessel details including classification as 'I.R.S.' and sought confirmation from insurer; insurer issued policy without objection. Held that insurer cannot later repudiate claim for breach of classification clause without proving assured's privity to unseaworthiness or that classification was not acceptable at inception (Paras 4-6). B) Insurance Law - General Average Guarantee - Estoppel - Insurer issued General Average Guarantee after loss, then withdrew it citing breach of classification clause. Held that insurer is estopped from denying liability after issuing guarantee, as it induced the assured to act to its detriment (Paras 7-8). C) Consumer Protection Act, 1986 - Deficiency in Service - Insurer's failure to issue salvage security and withdrawal of guarantee amounts to deficiency in service. Held that insurer must indemnify assured for losses including salvage, demurrage, and legal costs (Paras 9-10).
Issue of Consideration
Whether the insurer can repudiate a marine insurance claim on the ground of breach of the Institute Classification Clause when the assured had disclosed all particulars of the vessel and the insurer had issued a General Average Guarantee; and whether the insurer's failure to issue salvage security and withdrawal of guarantee amounts to deficiency in service.
Final Decision
Appeal allowed. NCDRC order set aside. Respondent directed to pay all losses incurred by appellant including salvage, demurrage, and legal costs with interest at 9% per annum from date of complaint till realization.
Law Points
- Institute Classification Clause
- General Average Guarantee
- Estoppel
- Deficiency in Service
- Consumer Protection Act
- 1986
- Marine Insurance Policy
- Waiver of Implied Warranty of Seaworthiness
- Burden of Proof
