Double Insurance : A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less

Citation : United India Insurance Co. Ltd. vs Levis Strauss (India) Pvt. Ltd., Civil Appeal No. 2955 Of 2022

Date of Judgment/Order : May 02, 2022

Court/Tribunal : The Supreme Court Of India

Corum : Uday Umesh Lalit; J., S. Ravindra Bhat; J., Pamidighantam Sri Narasimha; J.

Background

The Respondents had an Standard Fire & Special Perils (SFSP) Policy with the Insurer covering stocks while in storage while the parent company of Levi had obtained a global (STP) policy from Allianz Global Corporate & Specialty covering stocks of all its subsidiaries, including Levi.

When a fire broke out in one of the warehouses containing Levi’s stocks, the claim of the Respondent was repudiated on the ground that as per policy terms the affected stocks in the present claim, at the hands of the logistics provider would squarely fall within the scope of the aforesaid Marine cover, being in storage in the course of movement to retail locations and the insured would have to have to recover the loss from the marine policy.

The Respondents argued before the NCDRC that they had taken the domestic policy as it was obligatory under the terms of the Foreign Policy. The coverage under both policies was envisioned to be mutually exclusive.

The insurer’s defence was that the Levi was not obliged to secure a domestic policy and the domestic Policy did not cover any loss or damage to the property which at the time of the happening of such loss or damage was insured. That Levi could (and did) recover loss from the foreign Policy.

As the NCDRC decided in favour of Levi, the insurance company preferred an appeal before the Supreme Court.

The impugned order was based on the reasoning that there was difference in the perils insured and the conditions and / or limits of liability under the domestic policy and the STP Policy. Therefore, the loss of profit which Levi would have earned on sale of the damaged/destroyed cost was payable to it by Allianz, whereas the loss suffered by Levi to the extent of the cost of those goods would be reimbursable under the domestic policy issued by the insurer.

Judgment

The Supreme Court observed that the NCDRC did not finally decide whether the STP Policy was a marine policy and referring to the provisions of the Marine Insurance Act, 1963 went on to decide that  STP Policy was a marine policy which comprehensively covered voyage, transit, transportation and warehouse perils. As can be seen from the description of the policy, and other express stipulations, all kinds of risks, including marine risks were covered.

On the issue of "Double Insurance", the Supreme Court said that there is no no legislation which compelled it to obtain insurance to cover risks which it sought to get covered by the SFSP Policy. The Section 25 of the Nationalization Act merely states that properties in India not to be insured with foreign insurers except with permission of Central Government. Therefore there was no obligation on Levi to obtain a marine policy to cover all risk nor was there any obligation to obtain a domestic policy, in the conduct of its business.

Referring to a wealth of authoritative writings, the Supreme Court said that double insurance arises where two or more independent insurers cover the same interest against the same risk, that is, there is a common liability. In National Employers Mutual General Insurance Association v Haydon, the court had held that sharing of liability only applies if an indemnity is payable under both policies. A clause of express absolution from one policy by reference to another only applies if there is another policy which indemnifies against the same risk. If this were not the case, an unfortunate insured could fail to recover against the first insurer because of the existence of the second policy, but fail to recover under the second policy because the risk had not been accepted by the second insurer. If only one insurer is liable the insured can claim the whole.

In the present case, the Indian insurer was never informed of the existence of the foreign policy. It is also a matter of record that as against the claim of ₹12.2 crores made upon the insurer in this case, Levi ultimately received equivalent of over ₹19 crores. A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less. In the case of specific risks, such as those arising from loss due to fire, etc., the insured cannot profit and take advantage by double insurance.

Setting aside the NCDRC order, the Supreme Court said Levi could not have claimed more than what it did, and not in any case, more than what it received from Allianz. Its endeavour to distinguish between the STP Policy and the SFSP Policy, i.e., that the former covered loss of profits, and the latter, the value of manufactured goods, is not borne out on an interpretation of the terms of the two policies. Even the facts here clearly show that Levi received substantial amounts towards the sale price of its damaged goods, over and above the manufacturing costs.