NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 167 OF 2000 M/s. Jagson International Ltd. Complainant Versus New India Assurance Co. Ltd. & Ors. Opposite Parties BEFORE : HONBLE MR.JUSTICE M.B. SHAH, PRESIDENT DR. P.D. SHENOY, MEMBER For the Complainant : Mr. R. C. Mishra, Advocate For the Opp. Party : Mr. Vishnu Mehra, Advocate Dated : 11.04. 2005 O R D E R
M.B. SHAH, J., PRESIDENT
It
is the say of the complainant that the company is engaged in the business of
drilling oil in Bombay High area under the supervision of Oil and Natural Gas
Commission. For this purpose, the
complainant owns a RIG. The complainant
took an insurance policy called Combined Hull Policy/Package Policy for an
amount of Rs.42,50,00,000/- by paying premium of
Rs.19,16,750/- for a period effective from 23.12.1998 to 22.12.1999; on 29th June, 1999 an accident
took place and the crane boom got twisted and the bridle line broke and boom
fell on the top of the schlumberger unit. On the same date, complainant addressed a
letter to the insurance company giving details of the accident of Deep Sea Matdrill Jack Up Rig which was
insured. On 30.6.1999, the complainant
estimated the cost of repairs / replacements which was
expected to exceed 15 million rupees.
Thereafter,
the insurance company appointed M/s. J.B. Boda
Offshore Surveyors & Adjusters Pvt. Ltd. to
assess the damage. As per the surveyors
report circumstances leading to incident are as under:
On June 29, 1999 the rig was in the process of
exploratory drilling at location C-37/B at Tapti
Field.
At 0950 Hrs.the rig had commenced
parallel operations of snatch lift of cargo consisting of production control
head from OSV/ SINDHU-8 using the barges Port Crane.
During the operation of attempting to rig up and lift the
cargo, the vessel, due to strong winds and tide caused by the prevailing
monsoon was unable to hold position resulting in the crane hook entangling with
the support rail of SINDHU-8.
The fast and uncontrollable drift to the vessel with the
fouled up lifting hook of the crane caused serious buckling of the boom and
subsequent shearing at the hinge of the boom whose free fall resulted in
multiple damages to the surrounding structure (Like Helideck,
Schlumberger Unit) and the crane sections (Hoist Wires, Prime Mover and
Operators Cabin).
In the preliminary report, surveyors
estimated the loss at Rs.74 lakhs.
Complainant protested and presented the claim bills at Rs.80,69,136/-. The surveyors informed that air-freight will not
be allowed and only notional sea-freight will be considered and submitted the
final survey report dated 3.2.2000 assessing the loss at Rs.42,97,253/-.
Relevant part is
as under:
FINAL ADUJSTMENT
SUMMARY
Sr. No.
Description
Amount Rs.
1.
Amount Considered
fair and reasonable.
Rs. 42,97,253.00
2.
Less: Payment ON
ACCOUNT Recommended vide our Report of even number dated August
20,1999.
Rs. 18,50,000.00
Total :
Rs. 24,47,253.00
After application of the deductible excess of Rs.
20,00,000=00, a net adjusted claim of Rs. 4,47,253=00 falls for underwriters consideration.
Rs.20 lakhs were deducted by applying 30% depreciation
towards cost of spares.
Thereafter, on March 3, 2000 the Complainant informed the CMD, Insurance Company that they have
given final bill amounting to Rs.80 lakhs to the surveyor on 14.12.1999. This
bill contained airfreight charges amounting to Rs.17 lakhs as the spare parts
were required to be brought by air because it was urgently required and no ship
was available for the next few days. Nowhere in the policy, there is a
condition which provides that airfreight is to be excluded. It was, therefore, contended that the
surveyor has arbitrarily awarded only Rs.3 lakhs and not Rs.17 lakhs.
Again a letter
was written on 10th March, 2000 stating
that they do not require any favour from the surveyor whom the Insurance
Company thought fair and reasonable. The
settlement can be reasonable only if it is in accordance with the policy issued
by the Insurance Company. It was also
stated that surveyor has wrongly referred to a condition of the insurance
policy which provides that cost of replacement less depreciation will be paid.
It was also mentioned that even in normal course they bring the spare parts by
air and there is no written agreement that airfreight will
not be paid. It was pointed out that the surveyor
was definitely prejudiced for reasons which are not known. But, the Insurance
Company is a party to the contract and and should not
act against it.
To
that letter reply was sent by the Assistant General Manager of the Insurance
Company on 27/28th April, 2000 wherein it was stated that expediting
expenses were not allowed, as the policy did not cover for such expenses. It is
submitted that premium for expediting expenses were not paid by the
Complainant. Therefore, airfreight was rightly not granted. It was also pointed
out that the amount of Rs.20 lakhs was deducted as per the terms of the policy.
For this, reference is made to term of the policy which provides for expediting
expenses.
In view of the aforesaid dispute, as
the claimed amount was not paid, this complaint was filed on 19.5.2000 before
this Commission for recovering, in all, Rs.62,19,136/- towards loss suffered by
the Complainant with interest at the rate of 18% p.a. and costs.
At the time of
hearing of this complaint, learned Counsel for the Complainant raised only two
contentions, namely:
(a)
deduction of Rs.20 lakhs is totally unjustified. The said deduction is on the
basis of depreciation of the crane which was repaired by spending large
amount. The reduction of this amount is
without any basis.
(b)
secondly, there was no justifiable reason for not awarding airfreight charges of
Rs.17 lakhs and only of paying Rs.3 lakhs which would be sea freight for
bringing the spares from Huston (U.S.A.) and Singapore.
Contention (a):
Learned
counsel appearing on behalf of the insurance company submitted that reduction
of 30% is on the basis of clause-10 of the insurance policy. The said clause is as under
:
Limit of
Liability:
In no event, except as
provided for in the Sue and Labour Expense Clause and Collision Liability
Clause herein, shall the Underwriters liability arising from any one accident
or occurrence exceed the amount insured hereunder as set forth in Clause 3 in
respect of the items subject to claim in such accident or occurrence.
In
respect of the property insured hereunder Underwriters shall not be liable for
more than their proportion of the cost of repairing or replacing the property
damaged or lost with materials of like kind and quality to a condition equal to
but not superior to or more extensive than its condition prior to the loss; nevertheless
in respect of the hull of the drilling be covered hereunder all costs of repair
and replacement for which Underwriters may be liable shall be on the basis of
new for old with no deduction for depreciation.
In no event
shall Underwriters be liable for any increased cost of repair or construction
by reason of law, ordinance, regulation, permit or licence regulating
construction or repair.
On the basis of the aforesaid clause it is submitted that
the insurance companys liability is limited to replacing the property damaged
with materials of like kind and quality to a condition equal to but not
superior to its condition prior to the loss.
It is contended that admittedly the complainant in their balance sheet
had claimed 30% depreciation of the repaired item and, therefore, the said
amount was justifiably deducted.
In
our view, this submission cannot be accepted.
If we read the aforesaid clause, it is apparent that the insurance
company has limited its liability to the extent of cost of repairing or
replacing the property damaged or lost with materials of like kind and quality
to a condition equal to but not superior to or more extensive than its
condition prior to loss. In this case, the complainant has not purchased a new
crane. The crane is repaired and for
repairs whatever amount is required to
be paid, is
to be reimbursed
by the insurance company. It cannot be
contended that as
the RIG was used for some time,
the
Cmplainant should repair the
crane and replace the damaged parts only with those parts which were used for
some time or similarly used articles.
This would be practically impossible.
It is not the case of the insurance company that the complainant has
repaired the crane with any superior material or that material was of different
kind and quality.
Further, in the
complaint it has been pointed out that the crane is a part of hull of
the rig and there cannot be deductions for depreciation as envisaged under
condition for limit of liability. The relevant clause is quoted above. It specifically provides that in respect of
the hull of the drilling base covered all costs of repairs and the
replacement for which the underwriters shall pay on the basis of new for old
with no deduction in depreciation.
On behalf of the
Insurance Company an affidavit has been filed by Mrs. Alice G. Vaidyan, who was working as Manager in the office of the
Insurance Company. In the said affidavit it has been stated that there is no
damage to the hull of the drilling barge covered by the policy, but damage is
only to the crane which is not the hull of the drilling barge, but is only an equipment. In our view, it would be
difficult to hold that the equipment which is part of the hull cannot be said
to be part of the hull. It has been
rightly pointed out that the property insured is jack up drilling Rig Matdrill which consists of hull and machinery of the
drilling barge, hull and crane cannot be treated as separate item. Crane is an integral part of hull and not
equipment. There is nothing on record to
hold that the crane is not part of the hull of the drilling barge. The policy
taken by the insured is a combined hull package policy. In any case, if the
term of the policy is vague, benefit certainly goes to the assured and not to
the insurer. Otherwise, the purpose of insurance policy to protect against the
perils for which insurance coverage is given, would be
defeated. Law on this subject is settled
[(i) re.Shashi Gupta (Smt.) Vs. Life Insurance Corporation of India & Anr. 1995 Suppl. (1) SCC
7540]. [(ii) In United India Insurance
Co. Ltd. Vs. Pushpalaya Printers (2004) 3 SCC 694)]
the apex court has also held that where
the words of a documents are ambiguous they must be construed against
the party who prepared the documents
Further
to avoid such situation,
instead of borrowing the terms of the policy, it is high time for
Insurance Companies to have precise
terms of the policy which could be easily understood and suit the present day situation. If the terms of the policy are understood
properly by the parties such disputes could be avoided.
Admittedly,
in this case the complainant has submitted bills totalling Rs.80,66,196/-. However,
surveyors assessed the loss at Rs.42,97,253/- as fair
and reasonable cost of repair. Once that
amount was assessed, there was no justifiable reason to hold that repair cost
is required to be depreciated by 30%. In
this view of the matter, deduction of Rs.20 lakhs cannot be justified.
Contention (b)
The complainant has also claimed air-freight charges amounting to Rs.17
lakhs. The surveyors have allowed only
Rs.3 lakhs on the basis of ocean-freight.
For justification of the non-payment of air-freight, learned counsel Mr.Mehra submitted that no extra premium was paid by the
complainant. The relevant clause for expediting expenses is as under:
EXPEDITING EXPENSES
Coverage under this section of the policy is extended to
include additional costs and expenses reasonably incurred by the Insured or
on their behalf in connection with or incidental to expediting the
commencement, carrying out or the completion of the repair or replacement of
the interest hereunder as a consequence of the loss of or damage to property
covered by the terms of this policy.
Such additional costs and expenses include but are not limited to:
(a)
Necessary
expenses of chartered carriage or delivery
(b)
Chartered and /or
other travel (including by sea or air) of the Insureds directors, officers,
employees, agents, contractors, sub-contractors, consultants or representatives
(c)
Hire of additional
labour, equipment, materials or services
(d)
Accommodation including meals and other associated costs.
There
is nothing on record to arrive at a conclusion that the aforesaid term requires
payment of additional premium. The said
term only provides that policy is extended to include additional cost and
expenses reasonably incurred by the insured for carrying out the repair. As such, this can be termed as part and
parcel of the policy condition because for repairs reasonable cost incurred by
the insured is required to be reimbursed.
It does not require any separate payment of premium. Otherwise the whole purpose of the policy is
frustrated. There is nothing on record
to indicate that while accepting the large premium, the Insurance Company or its
agent had informed that repair cost would not include transport cost for
bringing articles for repair or if article is required to be shifted form one
place to another for its repair, the cost incurred for repair would not be
reimbursed. In any case, it depends upon the practice of the Complainant and it
is stated by the Complainant that in such cases, they were bringing such spares
for repair by airfreight. Further, if
such cost was not required to be reimbursed, then there was no necessity of
reimbursing notional
ocean freight. This reveals that stand taken by the Insurance
Company is inconsistent. Further, it is not the case of the Insurance
Company that the articles, which were brought from foreign country, were
available in India at a lesser cost.
In
the result, it is held that deductions of Rs.20 lakhs (30% depreciation from
the cost of repairs) and Rs.14 lakhs ( i.e. Rs.17
lakhs airfreight minus Rs.3 lakhs paid
on an assumption that goods ought to have been brought by ship) are held to be unjustified. Hence, the Insurance
Company is directed to pay to the Complainant in all Rs.34 lakhs which was wrongly deducted on the
alleged account of depreciation and from the airfreight incurred by the
Complainant with interest at the rate of 10% p.a. from six months after the
date of the incident, i.e. 29th December, 1999 till the
date of payment. The Opposite Party is also directed to pay Rs.10,000/- as costs. The costs shall be deposited with the legal
aid fund of NCDRC.
..J.
(M.B.SHAH)
PRESIDENT
.
(P.D.SHENOY)
MEMBER