UNITED INDIA INSURANCE CO. LTD versus LEVIS STRAUSS (INDIA) PVT. LTD on 2 May 2022

[2022] 10 S.C.R. 231

UNITED INDIA INSURANCE CO. LTD.

v.

LEVIS STRAUSS (INDIA) PVT. LTD.

(Civil Appeal No. 2955 of 2022)

MAY 02, 2022

[UDAY UMESH LALIT, S. RAVINDRA BHAT ANDPAMIDIGHANTAM SRI NARASIMHA, JJ.]

Insurance – Standard Fire & Special Perils Policy (SFSPPolicy) – STP Policy – Insurance by different Insurers – When OneInsurance Policy ousts the application of Other Insurance Policy –Respondent claimed benefit of insurance policy (SFSP Policy)provided by the appellant-insurer – Per contra the appellant refusedto grant the benefit of insurance to the respondent upon the premisethat the losses suffered by the respondent were covered underinsurance policy (STP Policy) obtained from AGCS (respondent’sparent company) – Aggrieved, the respondent approached theNCDRC – NCDRC allowed the insurance claim of the respondentholding that Condition-4 of SFSP policy would support the claimof the appellant only if the other policy (the one issued by AGCS)was a marine policy, which as per NCDRC, was not – Further byvirtue of S. 25 of the Nationalization Act, the respondent was underobligation to cover the risks through a domestic policy, which theydid in the present case and hence were entitled to the full benefit ofSFSP Policy – On appeal, held: As far as obligation u/s. 25 of theNationalization Act is concerned, NCDRC was wrong – Mereprohibition in s. 25 of the Nationalization Act clearly did not applyto respondent’s parent company, which conducts business overseas(and not only in India) and obtain a marine cover which catered toall risks, (including marine risks as well as risks to the goods intransit and when they were warehoused) – Therefore, the prohibitionin s.25 per se does not apply – Equally, there was no specificprovision requiring respondent to obtain a domestic policy, in theconduct of its business – NCDRC also erred in holding that the STPpolicy was not a marine policy since the policy, comprehensivelycovered all kinds of risks including marine risks and what is materialis not whether the insurable event occurred during the voyage rather,

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Athe focus is on the nature of the cover and the cover clearly andunequivocally included marine perils therefore, it was a marine cover– Condition No. 4 of the SFSP Policy, which constituted a contractbetween the parties, precisely contemplated a situation whereby inthe event of occurrence of an insurance risk, if respondent (orsomeone on its behalf, like in the present case the parent company)Bwas entitled to claim under a marine policy, the insurer was not tobe held liable – Therefore, condition No.4 operated to exclude theappellant-insurer’s liability.

Words/Phrases – Double Insurance – discussed.

CAllowing the appeal, the Court

HELD: 1. The expression “marine adventure” is definedby Section 2(d). Similarly, “maritime peril” referred to in “marineadventure” is defined in Section 2(e). Section 3 defines a marinepolicy; Section 4, which is relevant for this case, deals with mixedDmarine and land risks. It inter alia, enables coverage – through“express terms, or by usage of trade” – extension of marinepolicies “so as to protect the assured against losses on inlandwaters or on any land risk which may be incidental to any seavoyage.” Warehouse risks, combined with voyage and othermarine risks, are considered as part of marine insurance policiesEin India. In the present case, the first two recitals of the STPPolicy, as well as the warehouse-to-warehouse transit (Clause 6)and other stipulations clearly state that the policy covers bothmarine and other risks. In fact, the STP describes itself as “OPENMARINE INSURANCE CONTRACT”. [Paras 28, 30, 31][250-FF, G-H; 252-D, G]

2. It is clear that the STP Policy was a marine policy whichcomprehensively covered voyage, transit, transportation andwarehouse perils. As can be seen from the description of thepolicy, and other express stipulations, all kinds of risks, includingGmarine risks were covered. In fact, different limits for “retaillocations” were provided; further Clause 6 also extended towarehouse risks. In these circumstances, and having regard tothe law declared by this Court, what is material is not whetherthe insurable event occurred during the voyage; rather, the focusis on the nature of the cover. The cover in this case, clearly andH

unequivocally included marine perils. Therefore, it was a marinecover. Condition No. 4 of the SFSP Policy, which constituted acontract between the parties, precisely contemplated a situationwhereby in the event of occurrence of an insurance risk, ifrespondent (or someone on its behalf, like in the present casethe parent company) was entitled to claim under a marine policy,the insurer was not to be held liable. In the light of the abovediscussion, on a plain and reasonable construction of ConditionNo. 4 of the SFSP policy, that once it is established thatrespondent– or on its behalf, in this case, its parent company –was covered for the risk under a marine policy, (the STP Policy)and was entitled to claim under it, the appellant insurer’s liabilitywas excluded. Therefore, on a plain construction of the terms ofthe policy issued by AGCS, it was a marine policy. Therefore,Condition No. 4 operated to exclude the insurer’s liability. [Paras32, 33, 36][252-G-H; 253-B-C; 254-D-E]

3. It is not respondent’s position that there exists anylegislation which compelled it to obtain insurance to cover riskswhich it sought to get covered by the SFSP Policy. In this context,a mere prohibition in Section 25 of the Nationalization Act clearlydid not apply to respondent’s parent company, which conductsbusiness overseas (and not only in India) and obtain a marinecover which catered to all risks, (including marine risks as wellas risks to the goods in transit and when they were warehoused).Therefore, the prohibition in Section 25 per se does not apply.Equally, there was no specific provision requiring respondent toobtain a domestic policy, in the conduct of its business. TheNCDRC, in this Court’s opinion, was clearly wrong in holdingthat Clause 47 applied and it had to be read in the way it was.[Para 42][257-A-D]

4. A plain reading of Clause 41 of STP Policy shows thatwhere fire insurance or any insurance which was taken out by thecarrier was available to the beneficiary, i.e., respondent, or ‘wouldbe so available’ if the STP did not exist, then a claim under thatpolicy, i.e., STP Policy would not be maintained and the insurancewould be void to that extent. There is nothing on the record toshow that any carrier or bailee in this case made a claim uponAlliance or any other insurer to recover possible liability in AB

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Afurtherance of any policy. What has been established from therecord is that the sum of $4.54 million was in fact disbursed torespondent as admitted liability by AGCS. In the circumstances,clearly, Condition No. 4 of the SFSP Policy operated and excludedthe appellant-insurer’s liability. [Para 44][258-B-D]

B5. What is in issue in this present case has beencharacterized as “double insurance”, i.e., where an entity seeksto cover risks for the same or similar incidents through twodifferent - overlapping policies. There is a wealth of internationaljurisprudence on the various nuances of double insurance. Suchdouble insurance is per se not frowned upon in law. The courtsChowever, adopt a careful approach in considering policies whichseeks to exclude liability on the part of the insurer. In the presentcase, the facts are that the only claim preferred by respondentwith the insurer on 18.07.2008 was for ` 12.2 crores. There is nomaterial on the record to show that during the subsistence of theDpolicy issued by the parent insurer, it was ever notified byrespondent about the existence of the policy issued by AGCS.The final report of the surveyors appointed by the appellant insurerassessed the total loss at ` 11.70 crores. However, it also statedthat as respondent’s parent company had obtained another policyunder which the loss was to be recovered, the claim wasEinadmissible because of Condition No. 4 of the SFSP Policy. It isalso a matter of record that as against the claim of ` 12.2 croresmade upon the insurer in this case, respondent ultimatelyreceived equivalent of over ` 19 crores. A contract of insuranceis and always continues to be one for indemnity of the definedFloss, no more no less. In the case of specific risks, such as thosearising from loss due to fire, etc., the insured cannot profit andtake advantage by double insurance. [Paras 45, 49, 50][258-D-E;262-A-D]

Peacock Plywood Pvt. Ltd. v. The Oriental InsuranceGCo. Ltd. [2006] 10 Suppl. SCR 140; United IndiaInsurance Co. Ltd. v Great Eastern Shipping Co. Ltd.[2007] 9 SCR 350; Export Credit GuaranteeCorporation of India Ltd. v. Garg Sons International(2014) 1 SCC 686 : [2013] 1 SCR 336; Vikram H

Greentech India Ltd. v New India Assurance Co. (2009)5 SCC 599 : [2009] 5 SCR 437; Sikka Papers Ltd. v.National Insurance Co. (2009) 7 SCC 777 : [2009] 9SCR 1088; Impact Funding Solutions Ltd. v. BarringtonSupport Services Ltd. [2016] UKSC 57 – relied on.

M/s. Galada Power and Telecommunication Ltd. v.United India Insurance Co. Ltd. (2016) 14 SCC 161;New India Assurance Company Limited and Ors. vs.Rajeshwar Sharma & Ors. (2019) 2 SCC 671 : [2018]14 SCR 1181 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2955of 2022.

From the Judgment and Order dated 01.08.2019 of the NationalConsumer Dispute Redressal Commission in Consumer ComplaintNo.213 of 2011.

A. K. De, Ms. Ananya De, Zahid Ali, Pramit Saxena, Advs. forthe Appellant.

Joy Basu, Sr. Adv., Ms. Surekha Raman, Akhil A. Roy, KanakGhosh, M/s K J John & Co., Advs. for the Respondent.

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[2022] 10 S.C.R.

AThe Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

1. This appeal questions an order of the National ConsumerDisputes Redressal Commission,[1] (hereinafter, “NCDRC”) which allowedBthe insurance claim of Levi Strauss (India) Pvt. Ltd. (hereinafter, “Levi/ insured / respondent”). Prior to this order, United India Insurance Co.Ltd. (hereinafter, “insurer / appellant”) had repudiated the policy issuedto Levi.

FactsC

C2. The insurer issued to Levi a Standard Fire & Special PerilsPolicy (hereinafter, “SFSP Policy”), for the period of 01.01.2007 to31.12.2007. This policy covered Levi’s stocks while in storage for thesum of ` 30 crores. Levi obtained another SFSP Policy for the period of01.01.2008 to 31.12.2008 on similar terms. Meanwhile, the parentcompany of Levi (i.e., Levi Strauss & Co.) had obtained a global policyDfrom Allianz Global Corporate & Specialty (hereinafter, “Allianz”) forthe period of 01.05.2008 to 30.04.2009, covering stocks of all itssubsidiaries, including Levi. The coverage through this stock throughoutpolicy (hereinafter, “STP Policy” or “foreign policy”) was for $10 millionin any one vessel or conveyance, and $50 million in any one location.EThe parent company also got another “all risks” policy (hereinafter, “ARPolicy”) issued by Allianz for the same period i.e., from 01.05.2008 to01.05.2009 covering the stocks of its subsidiaries throughout the worldbeing commercial lines policy. The limit of liability of the AR Policy wasup to $ 100 million.

F3. During subsistence of all these policies, on 13.07.2008, a firebroke out in one of the warehouses containing Levi’s stocks. On18.07.2008, Levi claimed ` 12.20 crores from the insurer. The claimform furnished to the insurer on that date valued extent of loss to beslightly higher at ` 12.5 crores. However, on the instructions of the globalinsurer of the parent company, the Surveyor & Loss Assessor Mr. K.P.GSen submitted a status report on 28.07.2008 provisionally assessing theloss at a higher figure of ` 14.30 crores. The insurer i.e., the appellantappointed its professional surveyor, Professional Surveyors and LossAdjusters Pvt. Ltd., for an assessment. The surveyor submitted the final Survey Report dated 08.08.2009 assessing the net loss at ` 11.34 crores.The insurer’s report recommended that it was not liable for the claim inview of Condition No. 4 in the SFSP Policy due to the policies issued byAllianz.

4. After considering the materials including Survey Report andthe conditions of the policies, the insurer repudiated Levi’s claim on11.09.2009. The repudiation letter stated as follows:

“The affected stocks in the present claim, at the hands of thelogistics provider would squarely fall within the scope of theaforesaid Marine cover, being in storage in the course ofmovement to retail locations.

Condition No.4 of the Fire Policy issued by us reads as under:- “4. This insurance does not cover any loss or damage toproperty which, at the time of the happening of such lossor damage is insured by or would, but for the existence ofthis policy, be insured by any marine policy or policiesexcept in respect of any excess beyond the amount whichwould have been payable under the marine policy orpolicies had this insurance not been effected.”

The Fire Policy thus excludes liability for such loss payableunder marine policy, had the Fire Policy not been effected.

In view of coverage under the Companies Insurance Policybeing a marine cover, Condition No.4 of the Fire Policy isattracted and you have to recover the loss from the marinepolicy.

In fact Clause 47 of the marine policy stipulates that “wherethe Assured....

Are obligated by legislation or otherwise to arrange insurancelocality, they shall continue to have the full benefits of theseinsurance in respect to difference in perils insured:....”

Therefore, Clause 47 rather than excluding liability in suchcases of local Policy being available, agrees to pay whereloss is not payable under such local policy. The aforesaidclause is thus intended to operate even in respect of propertyrequired to be insured locally, to the extent that the local policy A

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Amay not apply. In this case since the Fire Policy excludesliability where there is a marine policy, it is a situationcontemplated by Clause 47 and therefore marine policy cannotrefuse to answer the claim.

Accordingly, the Companies Insurance Policy beingBapplicable to the affected stocks and there is nothing toindicate that the extent of liability for insurer thereunder wouldbe less than the loss suffered, we have no liability under thefire Policy issued by us.

We therefore regret our inability entertain the claim.”CThe Complaint and Proceedings before NCDRC

5. Levi approached NCDRC with its complaint under Sections 21and 22 of the Consumer Protection Act, 1986 (hereinafter, “Act”). Italleged that in view of Section 25 of the General Insurance Business(Nationalization) Act, 1972 (hereinafter, “Nationalization Act”) it wasDobligated to obtain a policy issued by a domestic insurer to cover variousrisks, and that as a consequence, the condition in Clause 47 of the STPPolicy (which guaranteed coverage of the foreign policy in the eventthat the insured was obliged to seek domestic policy) was met.

6. It was further argued that the SFSP policy was to cover lossEexclusive of $50 million inventory, which was the limit indicated in theSTP Policy. Levi alleged that claim repudiation on the ground that therisk was covered by the global insurance policies (the STP Policy included)was contrary to Clause 41 (on ‘other insurance clauses’) of the STPPolicy. In fact, Levi also argued that Clause 41 provided that if any fireFinsurance was specifically available to it, the STP Policy would be voidto the extent of such being available.

7. The insurer’s defence was that the SFSP Policy did not coverany loss or damage to the property which at the time of the happening ofsuch loss or damage was insured, and which, but for the existence of theSFSP Policy, was insured by any marine policy or policies except inGrespect of any excess beyond the amount which would have been payableunder such marine policy. The insurer argued the fire policy issued by it,therefore excluded liability in respect of property covered by marinepolicy. The further argument was that in Condition No. 4 of the SFSPPolicy, coverage under the marine policy i.e., the STP policy, wasHexcluded. It was submitted that Levi could (and did) recover loss from the STP Policy. In this regard it was argued that Clause 47 of the STPPolicy would continue to cover the insured if the local laws or otherconditions obligated the insured (i.e., Levi) to arrange insurance locally.In the present case, it was submitted that Levi was not obliged to securea domestic policy.

The Impugned Order

8. The impugned order allowed Levi’s complaint. The NCDRCdid not finally decide whether the STP Policy was a marine policy. Itheld, on a consideration of Clause 47 of the STP Policy, that to theextent of the insured risk being covered by the domestic policy, coverageby the STP Policy stood excluded. The impugned order was based onthe reasoning that there was difference in the perils insured and theconditions and/or limits of liability under the domestic policy and the STPPolicy. Therefore, the loss of profit which Levi would have earned onsale of the damaged/destroyed cost was payable to it by Allianz, whereasthe loss suffered by Levi to the extent of the cost of those goods wouldbe reimbursable under the domestic policy issued by the insurer. Afternoting that Levi had received $4.54 million (which, when converted intoIndian currency, worked out to be ` 19.52 crores), the claim was allowedto the extent of ` 1.78 crores.

Contentions of the Parties

9. Mr. A.K. De, learned counsel appearing for the insurer arguedthat on a reading of the STP Policy issued by Allianz, fire risk in questionwas covered by virtue of the STP Policy being applicable whilst in transitand/or in store or elsewhere, including whilst at retail locations. It wasargued that the impugned order erroneously interpreted Condition No. 4of the SFSP Policy issued by it (i.e., insurer) and Clause 47 of the STPPolicy (issued by Allianz) to hold that the loss caused to the goods wascovered by the SFSP Policy, and loss of earnings of Levi was coveredby the STP Policy. It was argued that there was no basis either in thepleadings or in the material on record to bear out this distinction.

10. It was pointed out that the NCDRC completely overlookedthe fact that in the claim form dated 18.07.2008, Levi specifically allegedthat it suffered a loss of ¹ 12.4 crores, and against this, received $4.54million (equivalent to ¹ 19.52 crores) from Allianz. Clearly, on its ownshowing, Levi collected far more than the actual loss admitted by it. Itwas also argued that the NCDRC erred in not considering the facts of A

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Athe case and in upholding Levi’s argument that the STP Policy coveredthe loss sustained by virtue of loss of profit in addition to the cost ofgoods destroyed, and that the SFSP Policy covered only loss. It wasargued that the loss suffered or included was a composite one whichcould not be bifurcated in the manner that NCDRC was persuaded to,at the behest of Levi.B

11. Mr. Joy Basu, learned senior counsel for Levi argued that byvirtue of Clause 47 of the STP issued by Allianz, the findings of theNCDRC were justly warranted. It was urged that the primary obligationby law to arrange insurance locally i.e., through a domestic insurer,reflected the statutory mandate which arose in this case by virtue ofCSection 2(c)(b) of the Insurance Act, 1938 (hereinafter, “Act”) andSection 25 of the Nationalization Act. It was also urged that arguendo,if it were to be held that there was no legal obligation, nevertheless,Clause 47 contemplated other obligations by use of the term “orotherwise”. In the present case, Levi was under a contractual obligationD– in addition to its obligation under Section 25 – to cover its risk under adomestic policy. In such an event, by the virtue of Clause 47, the primaryliability towards the insured risk lay with the domestic insurer, i.e., theappellant.

12. It is submitted that if such a domestic policy had not beenEavailed, there would’ve been non-compliance of Clause 47 of the STPPolicy which would have entitled Allianz to repudiate any claim if andwhen made by the parent company of Levi. It was further argued thatClause 47 of the STP Policy had to be read harmoniously with ConditionNo. 4 of the SFSP Policy. The coverage under both policies wasenvisioned to be mutually exclusive.F

13. It was argued next that by virtue of Clause 47 of the STPPolicy, the fire incident cast liability upon the appellant insurer, and didnot result in repudiation of the SFSP Policy. It was submitted in thisregard that the SFSP Policy contained specific exclusions. Clause 9 ofthe General Exclusion condition was relied upon to show that specificGkinds of profit or earnings were excluded i.e., loss of profit / opportunitycost as being not payable under the domestic policy. Consequently, all indirect losses stood excluded. Such a specific condition did not rule outother kinds of loss of profits. It was urged that the primary aim or purposeof the SFSP Policy was to cover all manner of losses arising out ofHinsurable incidents of different kinds. In this case that was fire; the only amount payable under the SFSP Policy was relatable to loss. Undoubtedly,the SFSP Policy expressly disassociated itself from loss other thanmanufacturing as a result of fire. That was covered by the STP Policy.Consequently, there was no overlap between the claims under the twopolicies.

14. It was argued that the insurer in its repudiation letter dated11.09.2009 and 29.01.2010 specifically took a position with respect toliability, by holding that Clause 47 was not intended to operate in respectof the property. It was therefore argued that the insurer was liable to theextent of the local policy applicable. Learned Counsel relied upon thedecision of M/s. Galada Power and Telecommunication Ltd. v. UnitedIndia Insurance Co. Ltd[2]to submit that the insurer could not be allowedto travel beyond the grounds on which the claim was repudiated by it.Therefore, the appellant could not be allowed to resist the claim on theground that it was payable under the AR Policy, even if it was not payableunder the STP Policy issued by Allianz.

15. Learned senior counsel urged that it was only after attainingfull clarity on the aspects of difference in conditions with regard to profitelement and manufacturing cost, and affording the insurer an opportunityto dispute and question the same, did the NCDRC pass the impugnedorder, which assessed the loss. It was argued that first, the NCDRCtook the figures in terms of report of the Domestic Surveyor appointedby it, who assessed gross cost of goods at ` 12.59 crores. A sum of` 88.57 lakhs was deducted from that for seconds goods (after washingand drying); and cost of stock impacted by fire was assessed @ ` 11.70crores. Salvage of ` 36 lakhs was assessed by the Domestic Surveyor.It was deducted, bringing the net loss to ` 11.34 crores. The NCDRCnoted that Levi claimed ` 9.08 crore in its complaint.

16. To reconcile the figures, NCDRC noticed the affidavit of KevinHeston Whelan and the Final Survey Report of the Foreign Surveyor,which found that the Foreign Surveyor assessed salvage at ` 2.6 crores,i.e., higher than that assessed by the Domestic Surveyor. If this salvageamount is deducted from the figure of ` 11.70 crores instead, then thefigure of ` 9.1 crores was payable to Levi by the insurer (after deductionof policy excess of ` 10,000/-). It was urged that in the alternative,NCDRC also assessed insurer’s liability on the basis of assessment bythe Global Insurer’s surveyor, which ultimately worked out to a total 2 (2016) 14 SCC 161.

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Afigure of ` 27 crores. After deducting the sum of ` 19.52 crores, thebalance i.e., ` 7.48 crores was held payable by the insurer.

17. Counsel lastly urged that if the insurer’s interpretation of theSFSP policy, as well as Clause 47 of the STP policy were to be accepted,the result would be anomalous inasmuch as the SFSP policy would inBeffect result in no coverage. In such case, the insurer would havecollected the premia (which it undoubtedly did) without any liability at all.

The Provisions of Law

18. The first issue involved before the NCDRC was whether theCSTP Policy was a marine policy. The NCDRC considered the stipulationsin the policy, having regard to Condition No. 4 in the SFSP Policy.However, it did not return any positive finding that the STP Policy was amarine policy. Since the parties have joined issues on this aspect, andmade submissions, the issue has to be decided, particularly in the contextDof the Condition No. 4 of the SFSP Policy and provisions of law. Itwould therefore, be relevant to examine the provisions of the MarineInsurance Act, 1963 in addition to other provisions. Section 3 of the Actdefines marine insurance. The expression “marine adventure” is definedby Section 2(d). Similarly, “maritime peril” referred to in “marineadventure” is defined in Section 2(e). Those definitions are extractedEbelow:

“ Section 2….

(d) “marine adventure” includes any adventure where -

(i) any insurable property is exposed to maritime perils; F(ii) the earnings or acquisition of any freight, passage money,commission, profit or other pecuniary benefit, or the securityfor any advances, loans, or disbursements is endangered bythe exposure or insurable property to maritime perils;

(iii) any liability to a third party may be incurred by the ownerGof, or other persons interested in or responsible for, insurableproperty by reason of maritime perils; (e) “maritime perils” means the perils consequent on, orincidental to, the navigation of the sea, that is to say, perilsof the seas, fire, war perils, pirates, rovers, thieves, captures, H

seizures, restraints and detainments of princes and people,jettisons, barratry and any other perils which are either ofthe like kind or may be designated by the policy..”

19. Section 4 clarifies that a contract of marine insurance may, byits express terms, or by usage of trade, be extended so as to protect theassured against losses on inland waters or on any land risk which maybe incidental to any sea voyage. The provisions of Marine InsuranceAct are therefore subject to the terms of the policy of insurance. Sections3 and 4 read as follows:

“3. Marine insurance defined.—A contract of marineinsurance is an agreement whereby the insurer undertakes toindemnify the assured, in the manner and to the extent therebyagreed, against marine losses, that is to say, the lossesincidental to marine adventure.

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 assuredagainst losses on inland waters or on any land risk whichmay be incidental to any sea voyage.

(2) Where a ship in course of building or the launch of aship, or any adventure analogous to a marine adventure, iscovered by a policy in the form of a marine policy, theprovisions of this Act, in so far as applicable, shall applythereto, but except as by this section provided, nothing in thisAct shall affect any rule of law applicable to any contract ofinsurance other than a contract of marine insurance as bythis Act defined.

Explanation.—”An adventure analogous to a marineadventure” includes an adventure where any ship, goods orother movables are exposed to perils incidental to local orinland transit.”

Section 57 states that where the subject matter insured isdestroyed, or so damaged so as to cease to be a thing of the kind insured,or where the assured is irretrievably deprived thereof, there is an actualtotal loss.

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A20. It is also relevant to note at this stage that Section 2 (13A) ofthe Insurance Act, 1938 too defines “marine insurance” expansively. Itreads as follows:

“(13A) “marine insurance business” means the business ofeffecting contracts of insurance upon vessels of anyBdescription, including cargoes, freights and other interestswhich may be legally insured, in or in relation to such vessels,cargoes and freights, goods, wares, merchandise and propertyof whatever description insured for any transit, by land orwater, or both, and whether or not including warehouse risksor similar risks in addition or as incidental to such transit,Cand includes any other risks customarily included among the risks insured against in marine insurance policies”

21. It is the consistent argument by Levi that the provisions of theNationalization Act obligate it to cover its risks through a domestic policy.Section 25 of the Nationalization Act, is as follows:D“25. Properties in India not to be insured with foreign insurersexcept with permission of Central Government.—

(1) No person shall take out or renew any policy of insurancein respect of any property in India or any ship or other vesselEor aircraft registered in India with an insurer whose principalplace of business is outside India save with the priorpermission of the Central Government.

(2) If any person contravenes any provision of sub-section(1), he shall be punishable with imprisonment for a term whichFmay extend to one year, or with fine which may extend to onethousand rupees, or with both.”

Relevant provisions of the STP policy and the SFSP policy

a. STP Policy

22. The relevant provisions of the STP Policy are extracted below:

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“OPEN MARINE INSURANCE CONTRACT

Issued to

Levi Strauss & Co. (and Majestic Insurance International Ltd.as a reassured where applicable) and/or subsidiaries and/orassociated and/or affiliated and/or controlled companies or H

corporations as may now exist or may hereafter be formed oracquired, any companies or corporations over which theAssured exercises management control and/or for whom theyhave authority to insure. Hereinafter referred to as the Assured(For account of whom it may concern)

(1) In consideration of premium to be paid at rates to beagreed, insurance herein covers all shipments of goods and/or merchandise of every kind and description, (including,but not limited to, raw stock, materials, stock and goods inprocess, finished goods and packaging materials), machinery,equipment, spare parts and shipping containers, freight andall other interests incidental to the Assured’s business, lost ornot lost, by any conveyance including any connectingconveyances between ports and/or places throughout theworld, including transhipment

(2) This policy covers continuously while in transit, from thetime of commencement of transit until delivery to ultimatedestination without limitation of time (except as may bespecifically excluded elsewhere herein) notwithstanding theWarehouse to Warehouse Clause and Marine ExtensionClauses.

B. This insurance to cover all shipments, whether made bythe Assured, or its agents, or by others for its account or inwhich it may have an insurable interest; also shipmentsbelonging to others, which the Assured has instructions, or isunder obligation (whether by arrangements, understandings,agreements or otherwise) or has a right to insure.

C. To take all insurances attaching hereto during the periodfrom 1st May, 2008 to 30th April, 2009, both days inclusive,Local Standard Time, at the place the shipment commencesand, on all goods, and/or merchandise and/or property instorage at locations insured under this policy.

SUBJECT MATTER INSURED:

Goods and/or merchandise and/or cargo of every descriptionincidental to the Assured’s business as may be declared.

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Consisting principally of, but not limited to, raw stock,materials, stock, goods in process, finished goods etc. andsimilar property of others for which the Assured is liable and/or duty and/or freight and/or insurance and/or interest and/or advances and/or charges.

Coverage hereunder includes whilst in transit and/or in storeor elsewhere, including whilst at retail locations.

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LIMITS

USD 10,000,000 any one vessel and/or conveyance USD50,000,000 any one location and in the aggregate per annumin respect of earthquake (first loss).

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But in respect of Retail Locations USD 5,000,000 any oneRetail Location and in the aggregate per annum in respect ofearthquake (first loss).

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(or equivalent in other currencies).

6. WAREHOUSE TO WAREHOUSE

EThis insurance attaches from the time the goods leave thewarehouse at the place named in the policy or certificate ordeclaration for the commencement of the transit and continuesuntil the goods are delivered to the final warehouse at thedestination named in the policy or certificate or declaration,or a substituted destination as provided in Clause 7.BFhereunder.

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41. OTHER INSURANCE CLAUSE

In case the interest hereby insured is covered by otherinsurance (except as hereinafter provided) the loss shall becollected from the several policies in the order of the date oftheir attachment, insurance attaching on the same date to bedeemed simultaneous and to contribute pro rata; provided,however, that where any fire insurance, or any insurance(including fire) taken out by any carrier or bailee is available G

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to the beneficiary of this policy, or would be so available ifthis insurance did not exist, then this insurance shall be voidto the extent that such other insurance is or would have beenavailable.

It is agreed, nevertheless, that where these Assurers are thusrelieved of liability because of the existence of otherinsurance, these Assurers shall receive and retain the premiumpayable under this policy and, in consideration thereof, shallguarantee the solvency of the companies and/or underwriterswho issued such other insurance and the prompt collectionof the loss hereunder to the same extent (only) as theseAssurers shall have been relieved of liability under the terms of this clause, but not exceeding, in any case, the amountwhich would have been collectible under this policy if suchother insurance did not exist.

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47. ADMITTED INSURANCE-DIFFERENCE IN CONDITIONSCLAUSE

It is agreed that where the Assured or any of their Associated,Affiliated or Companies or Partners are obligated bylegislation or otherwise to arrange insurance locally, theyshall continue to have the full benefit of these insurances inrespect to difference in perils insured, definitions, conditionsand/or limits of liability.”

(b) SFSP Policy

23. The coverage of the policy was as follows:

“Policy covers various loss or damage caused on account offire (excluding destruction or damage caused to the propertyinsured by:

a)i) its own termination, natural heating or spontaneouscombustion

ii) its undergoing any heating or drying process.

b)burning of property insured by order of any PublicAuthority.

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AGeneral Exclusions

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“9. Loss of earnings, loss by delay, loss of market or otherconsequential or indirect loss or damage of any kind orBdescription whatever.”

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Condition No. 4 which is material for the purpose of deciding thiscase is extracted below:

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“4. This insurance does not cover any loss or damage toproperty which, at the time of the happening of such loss ordamage, it insured by or would, but for the existence of thispolicy, be insured by any marine policy or policies had thisinsurance not been effected”.

DAnalysis and Conclusions

24. The fire incident took place on 13.07.2008. Levi’s goods werestored in the warehouse of Safexpress. There is no dispute that the fireincident was reported immediately. On 22.07.2008 and 23.07.2008, thepremises were visited by authorized representative of Kaypsens &EMcLarens Young International, Surveyor & Loss Assessor for final surveyto value the loss caused by the fire at the premises. They were nominatedby Allianz. Pursuant to that visit, a Status Report dated 28.07.008 wasprepared setting out the details of the accident and losses incurred.Subsequently the premises were once again inspected on 07.08.2008Fand 08.08.2008, pursuant to which a Second Status Report was madeon 11.08.2008. In the meanwhile, on receipt of the fire accident intimationthe insurer appointed M/s Professional Surveyors and Loss AdjustersPvt. Ltd. for survey and assessment of loss submitted their final SurveyReport on 08.08.2009. The surveyor assessed the loss for ` 11.34 crores.So far as the claim’s admissibility is concerned, the surveyor noticed theGtwo policies issued by Allianz, Clauses 41 and 47 of the STP Policy, andCondition No. 4 of the SFSP policy, and stated that in its opinion theinsurer “had no liability in respect of the captioned claim, in view ofthe Global Marine Policy.” The relevant observations are extractedbelow:

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XVII ADMISSIBILITY OF THE CLAIM:

a.The Insured’s Parent Company M/s Levi Strauss & Co.,has two Insurance Policies, one Companies Marinepolicy covering the goods worldwide and while atlocations worldwide for storage, processing orpackaging or otherwise, on First Loss basis for anBamount of USD 50,000,000 for any one location, as.per Endorsement No: 2 - Storage/Inventory/ProcessingCoverage. Clause 41 - Other Insurance Clause - alsoprovides for pro-rata contribution along with all otherinsurance-policies. This policy has been taken fromCAllianz Global Risks.

b.The other Policy taken by the Parent is a CommercialLines Policy from Allianz Global Risks US InsuranceCompany. This policy also covers goods worldwide uptoa loss limit of USD 100,000,000/= per location. ThisPolicy also has a Standard Fire Bay ProvisionsEndorsement which mentions “Pro-rata Liability”.

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c.According to Condilion No: 4 of the SFSP Policy issuedby UIC, “The Insurance does nol cover any loss ordamage to property which, at the time of happening ofsuch loss or damage, is insured by or would but for theexistence of this policy, be insured by any marine policyor policies except in respect of any excess beyond theamount which would have been payable under themarine policy or policies’ had this, insurance not beeneffected.”

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d.Therefore, in our opinion, UIIC has no. lability in respectof the captioned claim, in view of the Global MarinePolicy.”

Eventually, the insurer, on 11.09.2009, repudiated the claim. In themeanwhile, even before that event, on 18.07.2009, the insurer hadintimated to Levi that by virtue of Condition No. 4 of the SFSP policy,since the risk was covered by another policy, that fact had to beconsidered.

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25. The complaint before the NCDRC claimed the sum of ¹ 9.08crores along with interest @ 18% calculated from the date of claim to H

Athe date of payment. It was in these proceedings, for the first time, thatLevi disclosed that it received amounts in satisfaction of its claims underthe STP Policy issued by Allianz. It was submitted that the position withregard to the losses incurred by Levi as on date of the complaint wasthat the total inventory loss was $ 7.01 million. Under the STP Policyissued by Allianz to Levi’s parent company, US $4.54 million had alreadyBbeen paid to the parent company. Levi claimed that this was amount inexcess to the claim made by it under the SFSP Policy on “Difference inConditions” basis. Levi, therefore, claimed it was entitled to receive $1.97 million (~ ` 9.08 crores) under the SFSP Policy plus interest forinventory losses caused by the fire. The insurer resisted, arguing that byCvirtue of a co-joint reading of Condition No. 4 of the SFSP Policy, andClause 47 of the STP Policy, it was not liable.

26. NCDRC, in its impugned order, repelled the insurer’scontention, holding firstly that Condition No. 4 could operate only if theother policy (i.e., one issued by Allianz) was a marine policy. The NCDRCDdid not decide this issue. The impugned order next held that by reason ofSection 25 of the Nationalization Act, Levi was obligated to cover itsrisks through a domestic policy and therefore the condition in Clause 47of the STP Policy, it was entitled to the full benefit of the SFSP Policy. Itwas lastly held that the claimant was entitled to the amount of lossconstituting the difference between the pay out by Allianz and the valueEof the goods.

Was the STP Policy a Marine Policy?

27. In the light of the above facts, the first question which thisCourt has to decide is regarding the nature of the STP Policy issued byFAllianz. The insurer asserts that it was a marine policy. However, theNCDRC has held otherwise.

28. This Court has, in a previous section of this judgment, notedrelevant provisions of the Marine Insurance Act. The expression “marineadventure” is defined by Section 2(d). Similarly, “maritime peril” referredGto in “marine adventure” is defined in Section 2(e). Section 3 defines amarine policy; Section 4, which is relevant for this case, deals with mixedmarine and land risks. It inter alia, enables coverage – through “expressterms, or by usage of trade” – extension of marine policies “so as toprotect the assured against losses on inland waters or on any landrisk which may be incidental to any sea voyage.”H

29. In New India Assurance Co. Ltd. vs. Hira Lal Ramesh Chand& Ors[3]this court described a marine policy as follows:

“14. Marine Insurance is a contract whereby the insurerundertakes to indemnify the assured in the manner and to theextent thereby agreed, against marine losses, that is to saylosses incident to marine adventure. The instrument in whichthe contract of marine insurance is generally embodied iscalled a policy. The thing or property insured is called thesubject matter of insurance and the assured’s interest in thatsubject matter is called his insurable interest. That which isinsured against is the loss arising from maritime perils andcasualties, and these are called the perils insured against orthe losses covered by the policy. When the insurer’s liabilitycommences under the contract, the policy is said to attach;or in other words, the risk is said to attach or to begin to runfrom that time. A marine insurance cover applies to theshipment and if the shipment reaches the destination, in asafe and sound condition, no claim can arise against theinsurer. A contract of marine insurance may, however, by itsexpress terms or by trade usage, be extended so as to protectthe assured against losses on inland waters or against anyland risk which may be incidental to a sea voyage. (VideSections 3 & 4 of Marine Insurance Act, 1963 and Halsbury’sLaw of England, 4th Edition, Vol.25 paras 216 and 218).

(emphasis supplied)

30. Warehouse risks, combined with voyage and other marinerisks, are considered as part of marine insurance policies in India. Thishas been held in Peacock Plywood Pvt. Ltd. v. The Oriental InsuranceCo. Ltd[4]; United India Insurance Co. Ltd. v Great Eastern ShippingCo. Ltd [5]. In Hira Lal (supra), this Court, after considering Section 4 ofthe Marine Insurance Act, held as follows:

“17. In view of the insurance cover extending `warehouse towarehouse’ the consignments are covered by insurance notonly during the sea journey, but beyond as stated in the policy.

3 2008 (10) SCC 626.

4 2006 Supp (10) SCR 140.

5 2007 (9) SCR 350.

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ATherefore, the contention of the insurer that the insurancecover is available only in regard to maritime perils that isperils relating to or incidental to the navigation of the seamay not be correct. Having regard to Section 4 of the MarineInsurance Act and the terms of the policy undertakinginsurance cover against wider risks, the policy of insuranceBwould cover the loss not only while goods or navigating thesea but also any loss or damage during transit from the timeit leaves the consignor’s warehouse till it reaches theconsignee’s warehouse. The cover against risks will howevercease on the expiry of 60 days after discharge of theCconsignment from the vessel at the final port of discharge, ifthe goods do not reach the consignee’s warehouse or placeof storage for any reason within the said 60 days.”

31. In the present case, the first two recitals of the STP Policy, aswell as the warehouse-to-warehouse transit (Clause 6) and otherDstipulations clearly state that the policy covers both marine and otherrisks. An express condition is that “Coverage hereunder includes whilst in transit and/or in storeor elsewhere, including whilst at retail locations.

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LIMITS

USD 10,000,000 any one vessel and/or conveyance USD50,000,000 any one location and in the aggregate per annumin respect of earthquake (first loss).

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But in respect of Retail Locations USD 5,000,000 any oneRetail Location and in the aggregate per annum in respect ofearthquake.”

In fact, the STP describes itself as “OPEN MARINEINSURANCE CONTRACT”.G

32. In view of these materials, it is clear that the STP Policy wasa marine policy which comprehensively covered voyage, transit,transportation and warehouse perils. As can be seen from the descriptionof the policy, and other express stipulations, all kinds of risks, includingmarine risks were covered. In fact, different limits for “retail locations”H

were provided; further Clause 6 also extended to warehouse risks. Inthese circumstances, and having regard to the law declared by this Court,what is material is not whether the insurable event occurred during thevoyage; rather, the focus is on the nature of the cover. The cover in thiscase, clearly and unequivocally included marine perils. Therefore, itwas a marine cover.

33. Condition No. 4 of the SFSP Policy, which constituted acontract between the parties, precisely contemplated a situation wherebyin the event of occurrence of an insurance risk, if Levi (or someone onits behalf, like in the present case the parent company) was entitled toclaim under a marine policy, the insurer was not to be held liable.

34. In Export Credit Guarantee Corporation of India Ltd. v.Garg Sons International[6], this Court held:

“The insured cannot claim anything more than what is coveredby the insurance policy. The terms of the contract have to beconstrued strictly, without altering the nature of the contractas the same may affect the interests of the parties adversely.The clauses of an insurance policy have to be read as theyare. Consequently, the terms of the insurance policy, that fixthe responsibility of the insurance company must also be readstrictly. The contract must be read as a whole and every attemptshould be made to harmonise the terms thereof, keeping inmind that the Rule of contra proferentem does not apply incase of commercial contract, for the reason that a Clause ina commercial contract is bilateral and has mutually beenagreed upon. (Vide Oriental Insurance Co. Ltd. v. SonyCheriyan [ (1999) 6 SCC 451], Polymat India (P) Ltd. v.National Insurance Co. Ltd. (2005) 9 SCC 174], SumitomoHeavy Industries Ltd. v. ONGC Ltd. (2010) 11 SCC 296 andRashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran (2012)5 SCC 306)”

35. Similar views about the nature of insurance contracts and theprinciples of their interpretation were expressed in Vikram GreentechIndia Ltd v New India Assurance Co.[7]and Sikka Papers Ltd v 6 2014 (1) SCC 686.7 2009 (5) SCC 599.

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ANational Insurance Co[8]. It has been held recently, in Impact FundingSolutions Ltd. v. Barrington Support Services Ltd.[9] that “As a matter of general principle, it is well established that ifone party, otherwise liable, wishes to exclude or limit hisliability to the other party, he must do so in clear words; andBthat the contract should be given the meaning it would conveyto a reasonable person having all the background knowledgewhich is reasonably available to the person or class of personsto whom the document is addressed... This applies not onlywhere the words of exception remove a remedy for breach,but where they seek to prevent a liability from arising byCremoving, through a subsidiary provision, part of the benefitwhich it appears to have been the purpose of the contract toprovide.”

36. In the light of the above discussion, on a plain and reasonableconstruction of Condition No. 4 of the SFSP policy, that once it isDestablished that Levi – or on its behalf, in this case, its parent company– was covered for the risk under a marine policy, (the STP Policy) andwas entitled to claim under it, the appellant insurer’s liability was excluded.Therefore, on a plain construction of the terms of the policy issued byAllianz, it was a marine policy. Therefore, Condition No. 4 operated toEexclude the insurer’s liability.

Was Levi Obligated by Indian Law to Cover its Risks?

Was Levi Obligated by Indian Law to Cover its Risks?

37. Clause 47 of the STP Policy issued by Allianz stated that theassured (i.e., Levi’s parent company) “or any of their Associated,Affiliated or Companies or Partners are obligated by legislation orFotherwise to arrange insurance locally”.

38. The second question which arises for consideration is what isthe meaning of the term “obligated by legislation” This expression is anintegral part of Clause 47 of the STP Policy. An overall reading of thatcondition bears out the intention of the parties that regardless of whetherGdomestic legislation in a particular country mandates the taking out of apolicy issued by local insurer, the global insurer, i.e., Allianz would stillcontinue to be liable. This is clear from the latter part of the condition, 8 (2009) 7 SCC 777.

9 [2016] UKSC 57. This judgment was followed in New India Assurance CompanyHLimited and Ors. vs. Rajeshwar Sharma & Ors. (2019) 2 SCC 671.

“they shall continue to have the full benefit of this insurance inreference to the difference in the insured, definitions, conditionsand/or limits of liability.”

39. It is clear that if and only if the insured, i.e., Levi, is obligatedby law, i.e., required to have some form of mandatory insurance byvirtue of express provisions of law that the particular stipulation wouldoperate to the extent of ‘difference’, Levi would be entitled to claimfrom Alliance. The expression “obligated by law” has to be understoodin the context as mandatory.

40. According to Stroud’s Judicial Dictionary of Words andPhrases[10]:

“Obligation” is a word of his own nature of a large extent;but it is commonly taken in the common law, for a bondcontaining penalty, with condition for payment of money orto do or suffer some act or thing, etc. and a bill is mostcommonly taken for a single bond without condition. Theperson bound is the “obligor”; the other party is the“obligee”. See Ryland Vs. Delisle L.R. 3 P.C 17

The word “obligation” primarily means a tie. Legally it wasin origin the binding tie established by what is called a “bond”as between obligor and obligee. [Watkinson Vs. Hoolington(1944) K.B 16, 21 (Scott L.J.)]

“Oblige” :- A person is “obliged” to do a thing when placedin such circumstances that he can scarcely help it; e.g. aconstable who has been suspended and on whom an inquiryhas been ordered, and who thereupon sends his resignation,has been “obliged to resign”, within the rules of a pensionfund (Lapointe Vs. L’Association de Retraite, Montreal [1906]A.C. 535)”

P. Ramanatha Iyer’s Advanced Law Lexicon[11] explains the term:“”Obligate” means to bring or place under obligation; tobring or firmly hold to an act.

“Obligated” means strictly, and in common parlance, to bebound.

10 Ninth Edition (2016) Vol. II pg. 1691.

11 Sixth Edition, (2019) Vol.3 pg. 3833.

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A“Obligatio” denotes not merely the passive duty imposed uponthe obligor but also the relationship between the obligor andthe obligee such as that between debtor and his creditor. It isthat legal relationship subsisting between two persons bywhich one is bound to the other for a certain performance.

B“obligatio civilis” means an obligation enforceable by action,whether it derives its origin from the jus civile, as theobligation engendered by formal contracts or the obligationenforceable by bilaterally penal suits, or from such portionof the jus gentium as has been completely naturalized in thecivil law and protected by all its remedies, such as obligationCengendered by formless contracts.”

According to Black’s Law Dictionary[12]:

“Obligation is a legal or moral duty to do or not to dosomething”.

D“Legal obligation” has wide and varied meanings. It may referto anything that a person is bound to do or forbear fromdoing, whether the duty is imposed by law, contract, promise,social relations, courtesy, kindness or morality.”

41. It is therefore evident from the above discussion that thereEshould be a mandate in law or in contract or by contract (which is coveredby the expression “or otherwise”). The argument on behalf of Leviwas that Section 25 prohibits the foreign insurers from taking or bringingany policy of insurance in respect of any property in India and as a resultit was compelled to take out the SFSP Policy. If the plain meaning of theFexpression “obligated by law” or “obliged by law” is to be understood,there should be an express requirement in law, which compels the insuredto obtain a policy. There are provisions in specific legislations in thisregard, such as the Motor Vehicles Act, 1988[13]; the Merchant ShippingAct, 1958[14]; Carriage by Air Act, 1972[15] and the Public Liability InsuranceAct, 1991[16], etc. The conditions spelt out in these specific instancesG12 11th Edition (2019) page 129213 Section 146.14 Section 352; Section 434A and 434B.

15 Section 4A read with Para 50, Chapter VI, Third Schedule to the Act.16 Section 4 imposes a duty on owners of establishments involved in hazardousindustries, to take out insurance policies.H

compel entities and business to obtain specific kinds of insurance policiesto cover particular risks.

42. In this case, it is not Levi’s position that there exists anylegislation which compelled it to obtain insurance to cover risks which itsought to get covered by the SFSP Policy. In this context, a mere prohibitionin Section 25 of the Nationalization Act clearly did not apply to Levi’sparent company, which conducts business overseas (and not only in India)and obtain a marine cover which catered to all risks, (including marinerisks as well as risks to the goods in transit and when they werewarehoused). Therefore, the prohibition in Section 25 per se does notapply. Equally, there was no specific provision requiring Levi to obtain adomestic policy, in the conduct of its business. The NCDRC, in thisCourt’s opinion, was clearly wrong in holding that Clause 47 applied andit had to be read in the way it was.

Interpretation of Clause 6 and 41 of STP Policy and ConditionNo. 4 of SFSP Policy.

43. As concluded in the first section of the analysis of this judgment,Condition No. 4 of the SFSP Policy clearly excluded the insurer’s liabilityin the event Levi could collect amounts under another insurance policyfor the same risk. Clause 6 of the STP Policy as well as the recitals(noted earlier) point to the fact that a comprehensive overall coveragewas envisioned by Levi’s parent company. That comprehensive riskincluded fire risks at the various warehouses where different subsidiaries,including Levi (insured in this case) had stored its goods. The surveyorsappointed by Allianz, Mr. K.P. Sen, prepared and submitted two reports.In the final report, according to the assessment made, two alternativeswere provided. In the first one, the value of the goods was affected bythe fire incidents after deduction for 2.5% for obsolete desktops and thevalue of net realization of salvage at actuals was fixed at ¹ 11.10 crores.According to the second alternative, which was on sale cost basis, again,after taking 2.5% for obsolete/dead stocks and subtracting net realizationof salvage value at actual cost, the next cost at net sale basis was assessedat ¹ 15.30 crores. Initially, the assessment (in terms of the documentsplaced on the record) was $3.60 million as on 19.08.2008. This reporttook note of a plausible claim by Levi upon the insurer. The subsequentsupplementary report which provided global claims services to Levi’sparent company dated 03.10.2008 indicated that “based on presentinformation”, it stated that the loss reserves should be increased to

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A$4.5 million. It further stated that upon review, MYI calculation ofinventory at wholesale selling price loss salvage value was $6.85 million.In these circumstances, finally, the sum of $ 4.54 million was paid out ($3 million plus ~$ 1.54 million).

44. A plain reading of Clause 41 of STP Policy shows that whereBfire insurance or any insurance which was taken out by the carrier wasavailable to the beneficiary, i.e., Levi, or ‘would be so available’ if theSTP did not exist, then a claim under that policy, i.e., STP Policy wouldnot be maintained and the insurance would be void to that extent. Thereis nothing on the record to show that any carrier or bailee in this casemade a claim upon Alliance or any other insurer to recover possibleCliability in furtherance of any policy. What has been established from therecord is that the sum of $4.54 million was in fact disbursed to Levi asadmitted liability by Allianz. In the circumstances, clearly, Condition No.4 of the SFSP Policy operated and excluded the appellant-insurer’s liability.

45. What is in issue in this present case has been characterized asD“double insurance”, i.e., where an entity seeks to cover risks for thesame or similar incidents through two different - overlapping policies.There is a wealth of international jurisprudence on the various nuancesof double insurance. Such double insurance is per se not frowned uponin law. The courts however, adopt a careful approach in consideringEpolicies which seeks to exclude liability on the part of the insurer.46. The celebrated commentary on insurance, Colinvaux’s Lawof Insurance, has this to say on double insurance - [17]:

Pg. 12-130: General definition. Double insurance ariseswhere two or more independent insurers cover the same interestFagainst the same risk, that is, there is a common liability[18].

As a matter of principle, it is clear that there cannot be doubleinsurance unless there is in existence more than on valid policyattaching to the same interest. There is, for example, no double G17 Colinvaux’s Law of Insurance 12th edition Sweet & Maxwell (2019) Ed. RobertMerkin 18 See generally, Albion Insurance Co Ltd v GIO (NSW) (1969) 121 C.L.R. 342. InEquity Syndicate Management Ltd v Glaxosmithkline Plc [2015] EWHC 2163 (Comm);[2016] Lloyd’s Rep. I.R. 155 a motor policy which by its terms covered a claim by anemployee driving a hired car was rectified to accord with the parties’ common intention,so that the risk was borne solely by a policy designed to cover such risks and there wasHno double insurance.

insurance where one policy is substituted for another[19]. Forthere to be double insurance the policies need not be identicalbut may cover different subjects and different risks as well asthe risk covered in common, but what is essential is that acommon liability to indemnify the same assured in respect ofa specified loss must exist. The loss which more than oneinsurer is liable to make good must be identical, so thatpayment of a claim by one insurer will provide a co-insurerwith a defence to a like claim against it. In other words, twoor more insurers must have insured the same assured in respectof the same risk on the same interest in the same subject-matter.[20]

Pg. 12-131: Same assured and same interest Doubleinsurance arises only where both policies cover the subject-matter which has been the subject of the loss. This is essentiallya matter of construction of each of the policies. Thus, in Baagv Economic Insurance Co Ltd[21] it was held that a lorry-loadof cigarettes insured under an all-risks transit policy did notform part of the assured’s stock in trade at a factory at whichthe load had been temporarily stored, so that the fire insurersof the factory were not liable to contribute towards paymentsmade by the all-risks insurers on the destruction of the factoryand the load by fire.”

Pg. 12-132: Same assured and same interest. Generally,double insurance arises where the same assured possessestwo overlapping policies, although there could potentially bedouble insurance where two assureds with the same interestin the subject-matter insured that interest. It is more likely,however, that different assureds will have different interestsin the insured subject-matter, and there is no double insurance 19 Union Marine Insurance Co Ltd v Martin (1866) 35 L.J.C. P. 181. See also QBEInsurance (International) Ltd v Allianz Australia Ltd [2018] NZCA 239, where thesecond policy was held to incept on the termination of the first, so that there was nooverlapping cover.

20 Portavon Cinema Co Ltd v Price & Century Insurance Co Ltd [1939] 4 All E.R. 601;North British & Mercantile Insurance Co v London, Liverpool & Globe Insurance Co(1877) 5 Ch. D. 569. See also: Co-operative Bulk Handling Ltd v SGIC (WA) (1990) 6ANZ Ins Cas 60-992; Boys v Insurance General Manager [1980] 1 N.Z.L.R. 87.21 [1954] 2 Lloyd’s Rep. 581. Cf. QBE Insurance (Australia) Ltd v Westfarmers GeneralInsurance Ltd [2010] N.S.W.SC. 855.

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Ain that situation because each assured is insuring his owninterest. Typical illustrations include concurrent interests inland held by vendor and purchaser,[22] landlord and tenant,[23]employer and contractor, or mortgagor and mortgagee,[24] andconcurrent interests in goods held by bailor and bailee.[25]Equally, there is no double insurance between a primaryBpolicy and a subsequent excess of loss policy[26] or between aprimary policy and an increased value policy.[27]"

47. Similarly, Mac Gillvray on Insurance Law[28]has this to say:

“There is high appellate authority[29] for preferring theCreasoning in the Eagle Star case to that in Legal & Generalon the ground that an insurer should be able to rely on policydefences to a claim by the assured in answer to a claim forcontribution. It is very respectfully submitted that Legal &General should prevail. If an insurer can defeat a claim forDcontribution by reliance upon defences to his liability to theassured arising after the loss, this will strike at the foundationsof the doctrine. First, once the first insurer has paid a completeindemnity to the assured, the second insurer would be entitledto decline liability to the assured on the ground that he has E

22 Davjoyda Estates Pty Ltd v National Insurance Co of NZ Ltd (1965) 69 S.R.(NSW) 381.

23 Portavon Cinema v Price [1939] All E.R. 601.

24 Western Australian Bank v royal Insurance Co (1908) 5 C.L.R. 533.

25 Dickson Watch & Jewellery Co Ltd v Mow Tai Insurance & Reinsurance CoFLtd [1985] 1 H.K.C. 505

26 Pacific Employers Insurance Co v Non-Marine Underwriters 71 D.L.R (4th)731 (1990); Steelclad Ltd v Iron Trades Mutual Insurance Co Ltd 1984 S.L.T.304.

27 Boag v Standard Marine Insurance [1937] 2 K.B. 113.

28 Mac Gillivray on Insurance Law Centenary Edition 2012 Sweet and MaxwellGPage 759 (24-027)

29 Bolton MBC v. Municipal Mutual Insurance Ltd. [2007] Lloyd’s Rep IR 173at [37] per Longmore L.J. Obiter, stating that precedent did not oblige the CAto follow Legal & General Assurance Society v. Drake insurance Co. [1992]

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been fully indemnified[30], although the payment is the basis ofthe equity between the two insurers. Secondly, it would bepossible for the second insurer to defeat the claim forcontribution by agreeing with the assured to cancel the secondpolicy after the first insurer had paid a complete indemnity,contrary to the decision in O’Kane v Jones, The Martin P[31]"

48. In National Employers Mutual General InsuranceAssociation v Haydon[32], ‘S’, a firm of solicitors was insured by ‘P’under a policy, renewable annually; that policy excluded indemnificationwhere the claimant was doubly insured. It however covered claims arisingafter expiration, if due notice was given of the likelihood of the claimbefore the policy expired. The claimant was later insured by anotherinsurer under a policy with similar double insurance provisions andexcluding cover for prior claims. S gave notice to P of a future claim indue time. P claimed a contribution from D, on the ground that this claimwas a case of double insurance. It was held that “Where each of two insurers agrees to an indemnity payableunder one policy, unless it is payable under another policy,neither insurer can prove that he is not liable; therefore bothinsurers are liable and there is a true event of doubleinsurance. In my judgment, however, the principle of Weddell’scase as to the sharing of liability only applies if an indemnityis payable under both policies. A clause of express absolutionfrom one policy by reference to another only applies if thereis another policy which indemnifies against the same risk. Ifthis were not the case, an unfortunate insured could fail torecover against the first insurer because of the existence ofthe second policy, but fail to recover under the second policy 30 Austin v. Zurich General Accident & Liability Insurance Co. [1945] KB 250at 258; AMP Workers’ Compensation v. QBE Insurance [2001] NSWCA 267,stating – “The right of contribution cannot depend upon the continuedexistence of co-ordinate liabilities for the same demand because the verypayment which calls the right into existence will have put an end to theliablility of the other insurance.”

31 O’Kane v. Jones, the Martin P [2004] 1 Lloyd’s Rep. 389, where the courtheld it was bound by precedent to follow Legal & General Assurance Societyv. Drake Insurance Co. [1992] QB 887 at [201]-[202].32 [1980] 2 Lloyd’s Rep. 149

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Abecause the risk had not been accepted by the second insurer.If only one insurer is liable the insured can claim the whole.”49. In the present case, the facts are that the only claim preferredby Levi with the insurer on 18.07.2008 was for ¹ 12.2 crores. There isno material on the record to show that during the subsistence of theBpolicy issued by the parent insurer, it was ever notified by Levi about theexistence of the policy issued by Allianz. The final report of the surveyorsappointed by the appellant insurer assessed the total loss at ¹ 11.70 crores.However, it also stated that as Levi’s parent company had obtainedanother policy under which the loss was to be recovered, the claim wasinadmissible because of Condition No. 4 of the SFSP Policy. It is also aCmatter of record that as against the claim of ¹ 12.2 crores made upon theinsurer in this case, Levi ultimately received equivalent of over ¹ 19crores.

50. A contract of insurance is and always continues to be one forindemnity of the defined loss, no more no less. In the case of specificDrisks, such as those arising from loss due to fire, etc., the insured cannotprofit and take advantage by double insurance. Long ago, Brett LJin Castettion v Preston[33]said that:

“The contract of insurance … is a contract of indemnity, …,and this contract means that the assured, in the case of a loss…, shall be fully indemnified, but shall never be more thanEfully indemnified.”

51. Levi could not have claimed more than what it did, and not inany case, more than what it received from Allianz. Its endeavour todistinguish between the STP Policy and the SFSP Policy, i.e., that theformer covered loss of profits, and the latter, the value of manufacturedFgoods, is not borne out on an interpretation of the terms of the twopolicies. Even the facts here clearly show that Levi received substantialamounts towards the sale price of its damaged goods, over and abovethe manufacturing costs.

52. In view of the foregoing discussion, the appeal has to succeed;Gthe impugned order of NCDRC is hereby set aside. Levi’s complaint isdismissed; consequently, the appeal is allowed.

Ankit Gyan(Assisted by : Mahendra Yadav, LCRA)H33 (1833) 11 QBD 380.

Appeal allowed.