Insurer must settle claim on probability

All the surveyors had given the opinion that the claim ought to be paid on the basis of the probability the incident was genuine

Kesharben Kanjibhai Cham of Porbandar owned a ship named M SV Chamstar, which was insured with National Insurance, under a policy valid from February 12, 1996 to February 11, 1997. On April 10, 1996, while returning from Dubai to Mumbai, the vessel accidentally hit a rock and sank at Khasab in Oman. When the accident occurred, there was no cargo in the vessel. However, 19 crew members and the tindel were on board. To save themselves, they boarded a lifeboat. They were found by the Oman Navy and arrested. After being in custody for four days, their release was arranged, and they were repatriated to India.

When the insurer was intimated about the loss, it hired Salvage Association as the surveyor, which reported that though it appeared probable, it was not possible to conclusively determine whether Chamstar had sunk. So the insurer appointed ICIC International Maritime Bureau to carry out further investigations, and their report gave a similar finding. The opinion of G P Dave was also sought, who also gave a similar opinion.

The insurer finally sought the opinion of W K Webster & Company, which reported that the only way to give a conclusive report would be by sending down divers to locate the wreck and verify the damage. As for whether the vessel had been deliberately sunk, Webster opined that this was unlikely as it would put the lives of the entire crew at risk. It also ruled out a clandestine sale of the ship. It pointed out that documents pertaining to statutory compliances had sunk. Webster concluded that though it was probable the vessel had sunk, this could not be stated with certainty.

In view of the claim being considered on the basis of probability instead of certainty, the insurer repudiated the claim. Kesharben, through her son and constituted attorney Premjibhai Cham, filed a complaint before the National Commission seeking reimbursement worth Rs 1.2 crore. The insurer justified the repudiation as the loss was not conclusively established.

The National Commission observed that all the surveyors and investigators had accepted that there were 19 crew members and the tindel on board at the time of the accident. The unanimous opinion was that the claim ought to be paid on the basis of the probability that the incident was genuine. The letter of the Assistant Officer Commanding, Coast Guard Police Division of Oman confirmed the incident. The Commission noted that the Government of India's Inquiry Officer had submitted a Marine Casualty Report accepting the vessel had sunk. On its basis, the vessel had been deregistered by the Government of India, Ministry of Surface Transport, and Mercantile Marine Department.

By its order of August 30, 2019, delivered by Justice V K Jain, the National Commission concluded that the claim was payable and ordered National Insurance to pay Rs 1.2 crore. Since the claim was not settled within nine months as required by Insurance Regulatory and Development Authority of India regulations, the Commission also awarded 9 per cent interest from January 1, 2003 onwards, with three months to comply with the order.

The writer is a consumer activist