Insurers must reimburse Customs under marine policy

Suzuki Powertrain India, which got merged with Maruti Suzuki, had taken a Marine Cargo Open Declaration Policy from National Insurance to cover the purchase of plant and machinery from vendors in Japan.

One of the consignments, which was packed in 31 containers under three bills of lading, was despatched in May 2008 on the M.V. Nagato from Japan to Kandla.

According to the declaration submitted under the policy, it was covered from April 11, 2008, to the midnight of April 10, 2009, until it reached its destinations of Manesar and Gurgaon. The value of the consignment was a little over ~447 crore, for which a premium of slightly more than ~10 lakh was charged, inclusive of service tax. The coverage limit per transit was restricted to ~60 crore.

The consignment was unloaded at Kandla on June 8, 2008, in proper condition, which was confirmed by the Marine Cargo Surveyor. While awaiting Customs clearance, there was heavy rain on June 13 and 14, and the containers were submerged in water, resulting in extensive damage to the machinery. This was communicated to the insurer and surveyors were appointed to inspect the containers.

Later, the containers were transported to Manesar, where they were inspected by the final surveyors, who assessed the loss at a little above ~16.65 crore.

The insurer delayed the settlement and offered to pay ~6.87 crore. Maruti sought clarification on this, but the insurer did not respond. So, Maruti filed a complaint before the National Commission.

National Insurance questioned Maruti’s status as a consumer, contending that the policy had been taken for commercial purposes. The insurer justified the amount offered towards settlement, contending that the value of the consignment was a little more than ~143.72 crore but the coverage was limited to ~60 crore. So, its proportionate liability, after deducting Customs duty, would work out to a little above ~6.64 crore.

Maruti argued there was no justification in making a deduction towards proportionate liability as the premium was paid on the value of the shipment and not limited to the coverage per transit.

The National Commission observed the Supreme Court in a case had held the insurer was not entitled to raise any new or additional grounds for defence. It would have to confine its defence only to those grounds mentioned either in the claim repudiation letter or in its letter offering a partial settlement of the claim.

It also said the Supreme Court in another case had held that a person engaged in commercial activity would be a consumer in respect of services availed for his personal use. It held Maruti would be a consumer entitled to file a complaint under the Consumer Protection Act.

The National Commission observed the ~16.65 crore, assessed by the final surveyor, had not been disputed by either of the parties. It pointed out that the Supreme Court in a case had laid down that Customs duty, being an integral part of the cost of importing a machine, would also have to be reimbursed by the insurer while settling the claim.

Accordingly, by its order of September 10, 2021, the National Commission ordered the insurer to pay the ~16.65 crore together with interest at 9 per cent per annum from January 1, 2009. In addition, it awarded ~1 lakh as litigation cost.

The National Commission ordered the insurer to pay the ~16.65 cr together with interest at 9% per annum from January 1