The Supreme Court has held that the shipping companies, engaged in transporting cargo from different countries to India, are entitled to claim compensation from insurance companies if the stock gets damaged or destroyed before it is supplied to the importer.

But for that beyond the port protection, shipping concerns must have extended insurance, says the Supreme Court in a major judgment last week.

“When the coverage was extended on same terms and conditions, it would mean that the goods were covered till the same reached in any part of the country in India,” said a bench of Justices A K Mathur and Tarun Chatterjee while rejecting United India Insurance Co. Ltd’s appeal against the National Consumers Disputes Redressal Commission judgment.

The National Consumers Disputes Redressal Commission had directed the insurance company to pay Rs 4.94 crore in compensation to Great Eastern Shipping Co which lost in fire 12,000 metric tonnes of sugar imported from China in 1994.

About 83, 000 bags of imported stuff had been lying at the Calcutta Port awaiting transportation to further destinations in the country.

Due to the Durga Puja festivities, the sweet grains couldn’t be moved out of the port. A big fire broke out at the port and the entire stock of sugar reduced to ashes.

The surveyors engaged by the shipping company and the insurance company estimated the loss at Rs 4.94 crore.
The Commission upheld it asking the insurance company to compensate the marine company with 9 per cent interest since the surveyors submitted their report in 1995.

The insurance company challenged the award saying the extended insurance cover didn’t mean that it was liable to compensate an insured for the damage of cargo which had been unloaded at the port.

Final destination
The Commission had held that “the insurance cover of the goods would be till the delivery to the consignees at the destination named therein i.e. the insurance coverage was valid till the goods were delivered to the consignees’ warehouse or other final warehouse or the place of storage at the destination.”

Shipping company’s counsel Anil B Divan said, “in case of interpretation of policy if two views are possible, then the one which favours the policy holder should be accepted as the same serves the purpose for which the policy is taken and would be in consonance with the object to be achieved for the lives assured.”

The judges also agreed with Mr Divan’s submission and held that “while interpreting the policy the courts should keep in view the intention of the parties as well as the words used in the policy. If the intention of the parties subserves the expression used therein then the expression used in that context should be given its full and extended meaning.”