Property can only be insured locally

The National Commission noted that claim was for loss of goods as well as for loss of profits. The local policy covered claim for loss of goods only, while the global policy covered loss of profits

Levi Strauss (India), a subsidiary of Levi Strauss (USA), which is in the business of manufacturing apparels and jeans, had appointed Safexpress for warehousing, distribution, and logistics management.

Levis USA had taken two Global All Risks Property Policies from Allianz Global. Levi’s India had additionally obtained a Standard Fire & Special Perils Policy from United India Insurance because the General Insurance Business (Nationalisation) Act prohibits property in India to be insured with a foreign insurer without prior permission of the central government.

When a fire broke out in its Bengaluru warehouse due to electric short circuit, the company lodged a claim with United India. The surveyor assessed the loss at Rs 11,34,56,211. However, it concluded that the loss was not payable under the policy. The insurer, as a result, repudiated the claim on the ground that the stock was in the custody of the logistics provider and was in transit to retail locations, so it would be outside the ambit of the policy. The insurer also disowned liability, stating that the same goods were insured by Levis USA under a policy issued by Allianz Global.

After this, Levi's India filed a complaint before the National Commission. It pointed out that the Global Policy excluded losses which were covered under a local policy. So the claim was covered only under the local policy issued by United India.

It was also argued that the locally-issued Standard Fire & Special Perils Policy excluded liability only if the same goods were also covered under a Marine Policy. Since there was no separate Marine Policy, it was pointed out that the only policy which covered the claim was the Standard Fire & Special Perils Policy issued by United India, and hence the refusal to settle the claim was incorrect.

The Commission upheld the insured's contention and ordered the claim to be paid. On a review petition filed by the insured, the Commission enhanced the claim amount. Both the parties then approached the Supreme Court, which remanded the matter back to the National Commission for reconsideration.

The National Commission went through the policy conditions. It noted that the claim was for the loss of goods as well as for the loss of profit. It found that the local policy issued by United India covered the claim for the loss of goods only, while the global policy merely covered the claim for loss of profit.

The insurer raised other gro­unds to justify the repudiation. Placing reliance on the Supreme Co­urt decision in the case of Galada Power & Telecommunication versus United India Insurance [(2016) 14 SCC 161], the National Commission refused to consider these new grounds as they were not mentioned in the repudiation letter.

Accordingly, by its order of August 1, 2011, delivered by Justice V K Jain, the National Commission ordered the insurer to pay the value of the damaged goods after adjusting the salvage value.

The writer is a consumer activist