Insurance should not be misused for unfair gains

The National Commission observed that Aryan Exports' recovery of US $59,180 exceeded the consignment's value and concluded that further claims would amount to unjust enrichment

Aryan Exports was engaged in the export of handmade carpets and rugs. It received an order from Atlanta Rugs in America for the supply of handmade carpets. It entrusted various consignments of carpets on different dates to Niranjan Shipping Agency.

The total value of the goods was $41,157.41. The goods were insured under a Marine Policy issued on May 6, 1994, by Oriental Insurance. The policy covered risk from “warehouse to warehouse” or “godown to godown”.
 

All the documents pertaining to the order were sent through Overseas Bank with instructions to deliver these to the importer’s representative. State Bank of India was assumed to be the consignee until the importer made the payment. Aryan Exports did not receive payment for the goods supplied. As the goods had to be stored until payment was received from the importer, the demurrage kept increasing day by day. When Aryan Exports threatened to sell the goods to another party, the importer released some amount to cover the demurrage and accepted delivery of the consignment. However, it did not pay 

for the goods.
 

Aryan Exports made inquiries through the Indian Embassy in Washington and was informed that Atlanta Rugs was a fraudulent, deceitful player and a habitual defaulter. Aryan Exports then filed a claim under the Marine Policy for the loss due to default in payment by the exporter. It also approached the State Court of Cobb County, State of Georgia, USA, seeking to recover $41,000, out of which the court awarded  $35,680. Oriental Insurance refused to settle the claim on the ground that its liability ended as soon as the consignment moved out of Indian territory, and also on the ground that the policy did not cover fraud by the consignee.

The repudiation was challenged by filing a complaint before the District Consumer Forum. After considering the contentions of both sides, the forum ordered the insurer to settle the claim. The insurer appealed to the Uttar Pradesh State Commission, which set aside the order, holding that the claim had been rightly repudiated.
 

Aryan Exports then filed a revision petition before the National Commission. It pointed out that State Bank of India had given a written admission that the goods had been arbitrarily and illegally released. It argued that the exclusion clause with respect to fraud by the consignee Atlanta Rugs would not extend to gross negligence on the part of State Bank of India in handing over the bill of lading and other documents without collecting the amount payable for the consignments. It also contended that the claim was payable as coverage was from warehouse to warehouse but the goods had never reached the destination warehouse.

The insurer argued that the insured goods had neither been lost nor damaged, so the claim was not maintainable. It also argued that the policy was for a fixed period, and this period would not get extended merely because the consignee had delayed taking delivery.
 

The National Commission, in its order dated November 22, 2023, delivered by Dr Inder Jit Singh, concluded that the insurer could not be held liable when there was no loss or damage to the goods. It concurred with the state commission’s view upholding the repudiation. Additionally, the National Commission observed that against the total amount of $41,157, Aryan Exports had already recovered $59,180 for demurrage and through court proceedings. As this amount already exceeded the value of the consignment, the National Commission concluded that the demand for any further amount would constitute unjust enrichment.


The writer is a consumer activist