Insurer is liable to pay for loss due to defective packaging

The Commission observed that the policy excluded defects in packaging from inception. But the package had been checked by the insurer's representatives and found to be in order

Dujodwala Products, a company engaged in manufacturing chemicals for local as well as export market, received an order for products from Saudi Rook Wool Factory at Riyadh. As the product was sensitive to atmosphere, the temperature had to be maintained at 5°C or less. Dujodwala hired a container from Maersk India, which had a built-in refrigeration system. The consignment was packed in 109 metal drums and placed in the container, which was examined by National Insurance before issuing a policy covering all risks. The container was loaded on a motor vehicle for transportation to JNPT, Nhava Sheva Port for shipment.

On October 18, 2006, Maersk informed Dujodwala that the container should not be shipped as it had failed to maintain the requisite temperature due to technical problem in the refrigeration system. Dujodwala tried to save it from damage by getting the container back to its factory at Raigad. Despite this, the consignment got damaged, so it lodged a claim. 

The insurer appointed a surveyor who assessed at Rs 12,22,869, after deducting 5 per cent towards salvage value. Despite the favourable survey report, the insurer repudiated the claim attributing the damage to change in temperature due to improper packing, which was not covered under the policy.

Dujodwala filed a complaint before the District Forum. This was contested by the insurer. A technical defence was raised that the complaint should be dismissed since Maersk was not impleaded in the proceedings, even though it was a necessary party, as the loss had occurred because of the defective container.

The Forum overruled the objection, holding that the claim would be payable as the policy covered all risks. It held the insurer liable for deficiency in service and ordered it to pay Rs 12,94,731 (inclusive of salvage), along with 12 per cent interest from February 10, 2008 onwards. Additionally, Rs 50,000 was awarded as compensation and Rs 5,000 towards litigation costs.

National Insurance appealed against the order to the Maharashtra State Commission. The latter observed that even though the policy covered all risks, it excluded damage caused due to packing. So, it concluded that the insurer could not be held liable for Maersk’s fault   in supplying a defective container and dismissed the complaint.

Dujodwala then filed a Revision Petition before the National Commission. The latter observed that the policy excluded defects in packaging from inception. In Dujodwala's case, the packaging was done professionally by Maersk, checked by the insurer's representatives and found to be in order. The defects occurred later due to failure of the refrigeration system. So the Commission held that the claim would be payable as the policy covered all risks.

Accordingly, by its order of August 31, 2020, delivered by Justice R.K. Agrawal presiding over the Bench along with Dr S.M. Kantikar, the National Commission allowed the revision, set aside the order of the State Commission, and restored the order of the District Forum, holding the insurer liable to pay Rs 12,94,731 towards the entire value of the damaged consignment.

The writer is a consumer activist