LEVIS STRAUSS (INDIA) PVT. LTD. vs UNITED INDIA INSURANCE CO. LTD

The complainant is a company registered under the Companies Act, 1956 and is a wholly owned subsidiary of Levi Strauss & Co. The complainant is engaged in manufacturing and distribution of apparel including jeans. The complainant appointed Safex Pvt. Ltd., as its warehousing and distribution contractor in India, responsible for the logistics management, including cargo handling, trucking and warehousing. The warehouse facilities provided by the Safex, included warehouse at 48/2, SKS Compound, 7 th Mile, Hosur Road, Bangalore. The parent company of the complainant had taken two global insurance policies, one called STP Policy and other called AR Policy from Allianz Global Corporate & Speciality. The complainant took a Standard Fire & Special Peril Policy from the opposite party namely United India Insurance Co. Ltd., to the extent of Rs. 30.00 crores for reimbursement of the loss, if any, on account of the destruction or damage of its property due to specified perils.

On 13.7.2008, a fire broke out in the Bangalore warehouse allegedly causing a loss to the extent of US $ 7019808 to the complainant. An initial claim of Rs.12.20 crores was then lodged by the complainant with the opposite party. The claim, however, was denied by the opposite party on the ground that the assets affected by fire in the warehouse were covered under the global policy taken by its parent company. Reliance in this regard was placed on Condition No.4 of the policy, issued by the opposite party. Under the global policy, a sum of US$ 4545384.54 was received by the parent company of the complainant from Allianz Global Corporate & Speciality. The complainant is therefore before this Commission, seeking payment of Rs.9.08 crores, stated to be equivalent to US$ 1974423.93, along with interest on that amount.

The complaint has been resisted by the opposite party. It is stated in the written version filed by the opposite party that the surveyor had assessed the loss of the complainant at Rs.11,34,56,211/- but reported that in view of the global policy taken by the parent company, the opposite party had no liability in respect of the said claim. Reliance by the opposite party has been placed upon Condition No.4 of the insurance policy, issued by it and Clause-47 of the global policy obtained by the parent company of the complainant.

It is not in dispute that a fire had broken out in the warehouse the stock of apparel owned by the complainant company were stored in Bangalore and the said stock, stored in the said warehouse, was substantially damaged or destroyed. Even the surveyor appointed by the opposite party assessed the loss to the complainant, exclusive of its profit at Rs.11,34,66,211/-. The question involved in this complaint is as to whether the loss suffered by the complainant on account of destruction and / or damage to the stock is covered under the insurance policy issued by the opposite party and if so, to what amount if any, the complainant is entitled after adjustment of the amount already received by it from Allianz Global Corporate & Speciality.

Clause -4 of the policy issued by the opposite party to the complainant reads as under: "4. This insurance does not cover any loss or damage to property which, at the time of the happening of such loss or damage, it insured by or would, but for the existence of this policy, be insured by any marine policy or policies had this insurance not been effected".

Clause-47 of the global policy taken by the parent company of the complainant reads as under:

"47. Admitted Insurance-Difference in Conditions Clause

It is agreed that where the Assured or any of their Associated, Affiliated or Companies or Partners are obligated by legislation or otherwise to arrange insurance locally, they shall continue to have the full benefit of these insurances in respect to difference in perils insured, definitions, conditions and / or limits of liability".

It is evident from a bare perusal of Clause 4 of the Domestic policy that it would apply only to a situation where the property which has been lost or damaged is insured under some other policy which is a Marine Policy. If the property so lost or damaged was insured by a policy other than a Marine Policy, the aforesaid clause would not apply. Further, in case a Marine Policy had been taken by the insured, the aforesaid clause would not apply where the property lost or damaged due to the specified perils is not insured under such a policy.

The term ''Marine Policy'' has not been defined in the insurance policy issued by the opposite party. In the absence of such a definition, the aforesaid term needs to be interpreted in the light of the provisions contained in the Marine Insurance Act.

Section 3 of the Marine Insurance Act defines marine insurance as under: "3. Marine insurance defined - A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventure".

Section 2 (e) of the said Act reads as under:

"2. Definitions - In this Act, unless the context otherwise requires -

... (b)......(c)... (d)....

(e) "maritime perils" means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints and detainments of princes and people, jettisons, barratry and any other perils which are either of the like kind or may be designated by the policy".

Section 4(1) of the aforesaid Act reads as under:

"4. Mixed sea and land risks - (1) A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage".

Section 5 of the said Act reads as under:

"5. Lawful marine adventure - Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance".

It is evident from a conjoint reading of the aforesaid provisions of the Marine Insurance Act, 1963 that a marine insurance policy necessarily envisages a sea voyage though, it may also insure the risk against other loss so long as the goods subject matter of the policy had a sea voyage. At least part navigation of the sea is necessarily required in a Marine Insurance Policy. Therefore, a policy which would cover the goods that have not even partly travelled through the sea cannot be said to be a marine policy. Admittedly, the goods which were destroyed in the warehouse at Bangalore were manufactured and transported in India through land. There is no evidence of the said goods having been transported through a sea voyage. Therefore, it cannot be said that the aforesaid goods were subjected to a marine adventure. The loss suffered by the complainant on account of the losses and destruction of the aforesaid goods therefore, cannot be said to be a marine loss. Though, the global policy taken by the parent company of the complainant from Allianz Global Corporate & Speciality also covered the goods that had sea voyage, it cannot be said to be a marine policy as far as the goods damaged and destroyed at Bangalore warehouse are concerned.

Even otherwise, it is evident from a perusal of Clause 47 of the global policy that to the extent the risk of the insured was covered by the domestic policy, it was not covered under the global policy. The use of the words "they shall continue to have the full benefit of these insurances in respect of the differences in perils insured'' leaves no doubt that in such a scenario the global policy covered only those perils which were not covered under the domestic policy. In the present case, the domestic policy i.e. the policy issued by the opposite party covered only the actual cost of the goods damaged or destroyed in the fire. To this extent, the global policy was not applicable. However, since the global policy was not restricted to the cost of the goods but also covered the loss sustained by the insured in the form of profit it would have made on the damaged or destroyed goods, the benefit of the global policy continued to be available to the complainant, to the aforesaid extent. In other words, as far as the cost of the damaged or destroyed goods is concerned, the same could be recovered by the complainant from the opposite party, whereas the loss sustained by it by way of loss of profit which it would have made on sale of the aforesaid goods was covered by the global policy.

The next question which arises for consideration is as to what amount, if any, the complainant is entitled from the opposite party. The surveyor appointed by the opposite party assessed the cost of the stock impacted by fire at Rs.11,34,56,211/-. The complainant itself has placed on record a copy of the interim surveyor / status report dated 28.7.2008 prepared by Kalyan Prasad Sen Surveyor and Loss Assessor instructed by M/s. Mc Larens Young International who assessed the loss to the complainant due to destruction or damage of the goods at Bangalore ware house. A perusal of the said report would show that the complainant itself indicated to the surveyor that their sale price was 2.20 times of their manufacturing cost, the manufacturing cost being Rs.29/-, the whole sale price being Rs.62/-, the retailer margin being Rs.30/-, VAT being Rs.4/- and CST being Rs.2/-. The total loss inclusive of profit to the complainant therefore, comes to Rs.24,96,03,664/-. The complainant is not entitled to more than the aforesaid amount of Rs.24,96,03,664/-, irrespective of whether it comes from M/s. Allianz Global Corporate & Speciality or it comes from the opposite party. If the aforesaid amount is divided into manufacturing cost and profit of the complainant, the manufacturing cost being Rs.11,34,56,211/- the profit component comes to Rs.13,61,47,453/-. The surveyor appointed by the opposite party found under insurance to the extent of 22.68%. Applying the under insurance to the loss of Rs.11,34,56,211/-, the adjusted loss comes to Rs.7,63,78,721/-. The complainant therefore is entitled to a total sum of Rs.13,61,47,453/- + Rs.7,63,78,721/- = 21,25,26,174/-. Admittedly, Allianz Global Corporate & Speciality paid a sum of US$ 4545384 to the complainant. As per RBI Circular, the price of US$ on 13.7.2008 i.e. the date of loss was Rs.42.82. Based upon the aforesaid exchange price, the amount received by the complainant comes to Rs. 19,46,33,366/-. The complainant having already received a sum equivalent to Indian Rupee 19,46,33,366/-, from Allianz Global Corporate & Speciality it is entitled only to the balance amount of Rs.1,78,92,808/- from the opposite party.

Since the aforesaid amount was not paid to the complainant even within six months from the date on which the claim was lodged and thereby the opposite party continued to utilize for its own benefit, the amount which was lawfully payable to the complainant, it must pay appropriate interest on the aforesaid amount with effect from six months from the date on which the claim was lodged.

For the reasons stated hereinabove, the complaint is disposed of with the following directions: (i) The opposite party shall pay an amount of Rs.1,78,92,808/- to the complainant, along with compensation in the form of interest on that amount @ 9% per annum with effect from six months from the date of lodgement of the claim, till the date on which the entire amount, in terms of this order, is paid;

(ii) The payment in terms of this order shall be made within three months from today;

(iii) In the facts and circumstances of the case, there shall be not order as to costs.