JUSTICE V.K. JAIN, PRESIDING MEMBER

          The complainant is a subsidiary of LS & Co. and is engaged in manufacturing and distribution of apparels and jeans.  The complainant had an agreement with the Safexpress Private Ltd. (hereinafter referred to as “Safex”) where-under Safex was appointed as the warehousing and distribution contractor of the complainant and was responsible for its logistics management.  Safex had provided warehouse facilities at various locations including 48/2 SKS Compound, 7^th Mile, Hosur Road, Kudlu, Bangalore to the complainant.  The complainant obtained a Standard Fire & Special Perils Policy from the opposite party namely United India Insurance Company Ltd. (hereinafter referred to as “UIICL”), for reimbursement of the loss, if any, sustained by it on account of destruction or damage of its properties, including stocks, due to the perils specified in the policy.  LS & Co., the parent company of the complainant had taken two global insurance policies, one known as STP (Stock Throughput Policy) and other known as Global All Risks Property Policy from Allianz Global for the period from 01.5.2008 to 01.5.2009.

 2.     The case of the complainant as set out in para 3.4 of the complaint, is that both the global policies provided cover only on ‘Difference in Condition’ basis, and, to cover the risks to the products arising locally, it had purchased insurance policy from the opposite party, in compliance with Section 25 of the General Insurance Business (Nationalization) Act, 1972, which prohibited a person from taking out any policy of insurance in respect of any property in India, with an insurer whose principal place of business is outside India, unless prior permission of the Central Government was obtained.  This is also the case of the complainant in para 3.5 of the complaint that the STP policy was placed on the understanding that a locally admitted insurance was in place at the warehouse whereas the STP police covered risks only on “Differences in Condition” basis.  Reference in this regard is made to Clause 41 and 47 of the STP policy.  The second global policy namely AR policy, according to the complainant covered losses in excess of US $ 50 million the inventory limit provided in the STP policy.  It is stated in para 3.6 of the complaint that the policy clearly stipulated that it covered deficiency in the amount of loss payable under the local policy and / or underlying policies.

3.      On 13.7.2008, a fire broke out in the Bangalore warehouse due to electric short circuit and an initial claim of Rs.12.20 crores was lodged by the complainant with the opposite party.

4.      Vide letter dated 11.9.2009, the opposite party denied the claim lodged by the complainant.  The repudiation letter, to the extent it is relevant reads as under:

          “On a careful consideration of the records available, it is found that the property affected also stands covered under a “Companies Insurance Policy” availed by M/s. Levi Strauss USA covering themselves and all subsidiaries and associate companies and as part of the multinational group wholly owned by Levi Strauss USA, you are covered under the aforesaid policy.”

          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.

          Condition No.4 of the Fire Policy issued by us reads as under:

          “4.     This insurance does not cover any loss or damage to property which, at the time of happening of such loss or damage is insured by or would, but for the existence of this policy, be insured by any marine policy or policies except in respect of any excess beyond the amount which would have been payable under the marine policy or policies had this insurance not been effected.”

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

          In view of coverage under the Companies Insurance Policy being a marine cover, Condition No.4 of the Fire Policy is attracted and you have to recover the loss form the marine policy.

          In fact Clause 47 of the marine stipulates that “where the Assured…….. are obligated by legislation or otherwise to arrange insurance locality, they shall continue to have the full benefits of these insurance in respect to difference in perils insured……….”

          Therefore, Clause 47 rather than excluding liability in such cases of local policy being available, agrees to pay where loss is not payable under such local policy.  The aforesaid clause is thus intended to operate even in respect of property required to be insured locally, to the extent that the local policy may not apply.  In this case since the Fire Policy excludes liability where there is a marine policy, it is a situation contemplated by Clause 47 and therefore marine policy cannot refuse to answer the claim.

          Accordingly, the Companies Insurance Policy being applicable to the affected stocks and there is nothing to indicate that the extent of liability for insurer thereunder would be less than the loss suffered, we have no liability under the fire Policy issued by us.”

         It would thus be seen that the claim was denied on the ground that the loss to the complainant was covered under the “Companies Insurance Policy” taken by its parent company Levi Strauss, USA.  No reference in the repudiation letter was made to the second global policy namely “Global All Risks Property Policy”.

5.     Being aggrieved from the repudiation of the claim, the complainant is before this Commission.  It is alleged in para 3.16 of the complaint that the total inventory loss of the complainant was US $ 7019808.47.  Under the STP Policy an amount of US $ 4545384.54 was paid to the parent company, being an amount in excess of the claim made by the complainant, under the SF and SP policy on “Differences in Conditions” basis and therefore, the complainant is entitled to receive US $ 1974423.93 (Rs.9.08 crores) under the SF & SP Policy, along with interest.

6.     The complaint has been resisted by the insurer, which has inter-alia stated in its written version that though the surveyor appointed by them had assess the loss to the complainant at Rs.113456211/- he had also reported that in view of the Global policy taken by the parent company, the opposite party had no liability in respect of the claim lodged by the complainant.  In support of the stand taken by it, the insurer has relied upon Condition No.4 of the Insurance Policy issued by it and Clause 47 of the STP Policy obtained by the parent company of the complainant. 

7.     It is also alleged in the written version filed by the opposite party that the complainant had received much more than the loss suffered by it under the Global Insurance Policy.

8.      Vide order dated 15.3.2017, this Commission allowed the complaint in the following terms:

          “(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.”

9.      The complainant filed a review application No.69 of 2017, seeking review of the above referred order dated 15.3.2017.  The review application was disposed of on 4.9.2017 with the following directions:

          “The operative part of the order of this Commission dated 15.3.2017 is therefore, modified as under:

          12.    For the reasons stated hereinabove, the complaint is disposed of with the following directions:

1. The opposite party shall pay an amount of Rs.2,92,38,520/- 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;

2. The payment in terms of this order shall be made within three months from today;

3. In the facts and circumstances of the case, there shall be no order as to costs.”

    

   10.    Both the parties filed Civil Appeals before the Hon’ble Supreme Court assailing the order passed by this Commission.  The appeals were disposed of vide order dated 01.12.2017, which inter-alia reads as under:

             “Since there appears to be some errors of calculation or interpretation of documents in the impugned order (s) which have been pointed out by learned counsel, we are of the view it will be appropriate that the matter is again heard by National Consumer Disputes Redressal Commission.

             As the matter is being remitted back to the National Commission, we have all contentions of the parties open, to be considered again by the National Commission.  The original complaint before it will stand restored.”

11.    On hearing the learned counsel for the parties pursuant to the above referred order of the Hon’ble Supreme Court, this Commission vide order dated 05.3.2018 directed as under:

          “I feel that it would be necessary to require the complainant to file an affidavit, with supporting documents, disclosing therein the nature of the claim it had received from M/s. Alliance Global.  In particular, the affidavit shall disclose whether the amount received by the complainant / its parent company comprised only the profit part or also included the manufacturing cost of the goods.  The complainant shall also file, if available with it, the final report of the surveyor appointed by M/s. Alliance Global.”

12     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, if 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 STP 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”.

13.    Vide order dated 30.7.2018, this Commission permitted the opposite party to serve interrogatories upon Ms. Shelly Kohli and
Mr. Kevin Heston Whelan, whose affidavits were filed by the complainant.  The interrogatories were delivered and answered accordingly.

14.    The main issue which arises for consideration in this complaint is the interpretation of the interplay between Clause 4 of the policy issued by the opposite party namely UIICL and Clause 47 of the STP Policy taken by the parent company of the complainant.  It is crystal clear from a bare perusal of Clause 4 of the policy issued by the opposite party that if the loss or damage covered under the said policy was insured under a Marine Policy, the complainant would not be entitled to any reimbursement from the opposite party, the remedy available to it in that case, being to seek reimbursement under the Marine Policy covering the loss or damage suffered by it.  However, on a careful consideration of Clause 47 of the STP policy, I am of the considered view that in the event of the insured having taken a local policy, the benefit of the STP policy was available to the insured only to the extent of the difference in the perils insured by the two policies and the conditions and / or limits of the liabilities of the insurer under the said policies.  Since a local policy had been taken by the complainant form the opposite party in respect of the loss of or damage to the goods stored in the Bangalore warehouse, the benefit of the said policy would be available to the complainant, to the extent, the reimbursement of the loss  was not available under the STP policy taken by its parent company.  It is not in dispute that the liability of the opposite party namely UIICL under the policy issued by it was restricted to the extent of the actual cost of the goods damaged or destroyed in the fire.  The loss of profit which the complainant would have made in the normal course of its business, on the sale of the damaged / destroyed goods is not reimbursable under the policy issued by UIICL. On the other hand, subject to the limitations and conditions stipulated therein, the benefit of the STP policy was not restricted to the cost of the goods damaged or destroyed in the fire and the said policy covered even the profit which the complainant would have made in the ordinary course of its business by selling those goods.  To this extent, 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 the complainant would have earned on sale of the damaged / destroyed cost was payable to it by M/s. Allianz Global, whereas the loss suffered by the complainant to the extent of the cost of those goods would be reimbursable under the domestic policy issued by UIICL.  I am unable to accept the contention of the learned counsel for the opposite party that in view of Clause 4 of the Domestic Policy,  even the cost of the damaged / destroyed goods is reimbursable by the global insurer and is not payable to the complainant by UIICL.  Such an interpretation, in my opinion, would be contrary to Clause 47 of the STP policy.  Clause 4 of the domestic policy and Clause 47 of the STP policy have to be read in conjunction and harmony with each other and one cannot be interpreted at the cost of discarding the other.

15.    It was submitted by the learned counsel for the opposite party that no clause identical to clause 47 of the STP Policy, finds place in the Global All Risks Property Policy taken by the parent company of the complainant and therefore, the reimbursement could be claimed by the complainant from Allianz Global under the said Global Risks Property Policy.  The said contention was vehemently repelled by the learned senior counsel for the complainant, who pointed out that the repudiation letter dated 11.01.2009, referred solely to the “Companies Insurance Policy” which is none other than the STP policy and had absolutely no reference to the Global All Risks Property Policy.  He also pointed out that Clause 47 of the STP Policy was expressly referred in the repudiation letter and was reiterated in the subsequent letter of UIICL dated 29.1.2010, responding to the letter of the Financial Controller of the complainant dated 22.12.2009.  In support of his contention, the learned counsel for the complainant placed reliance upon the decision of the Hon’ble Supreme Court in (2016) 14 SCC 161 Galada Power & Telecommunication Ltd. Vs. United India Insurance Company Limited & Anr. decided on 28.7.2016.

16.    In view of the decision of the Hon’ble Supreme Court in Galada Power (supra), the insurer cannot be allowed to travel beyond the grounds on which the claim was repudiated by it.  Therefore, UIICL cannot be allowed to resist the claim on the ground that it was payable under the Global All Risks Property Policy, even if it was not payable under the STP Policy, issued by Allianz Global.  In any case, the AR Policy was to trigger only in the event of loss being more than US$ 50 million, and had identical terms.  Considering the view taken by me, I need not examine the question as to whether the Global Policy taken by the complainant was a Marine policy or not.

17.    In his affidavit filed before this Commission Mr. Kevin Heston Welhan of Allianz Global Corporate and Specialty has inter-alia stated that since the complainant had taken out a local policy, in respect of the goods, subject of the claim, Clause 47 of the STP Policy is triggered and cover is provided to the complainant on “Difference in Conditions” basis.  According to him, this would mean that the STP policy will provide cover only for those aspects of a claim, that fall outside the terms and conditions of any local policy that the insured might have in place and which also fall within the terms and conditions of the STP policy.  He also stated in the said affidavit that the AR Policy provided cover of US$ 10,00,00,000 and had a deductible of US $ 5,00,00,000 and thus is not designed to be triggered by a property claim, until such time as the STP policy is exhausted.  He has clearly stated in the said affidavit that the Standard Fire & Special Perils Policy (taken from the OP) only provides cover in respect of manufacturing cost but the STP policy would also respond to a loss in relation to the profits which the complainant could have expected to earn on the goods when sold, as this relates to a difference in the applicable conditions between the two policies.  He also stated, in the said affidavit that the amount which the AGC determined as payable under the STP policy was calculated with reference to the amount which it believed would be payable under the UIIC policy and other aspects of the claim which were not recoverable under the UIIC policy. 

18.    It would thus be seen that even the global insurer interpreted the policy issued by it to mean that it covered only the profit which the complainant would have earned on sale of the damaged / destroyed goods, whereas the cost of those goods would be covered under the domestic policy taken by the complainant.  This interpretation was based upon the difference in conditions of the domestic policy and the global policy, the domestic policy covering the cost of the goods and the global policy covering the profit as well.  When both the policies are read in conjunction with each other, the interpretation taken by the Allianz Global Corporate appears to be absolutely correct.  Therefore, I have no hesitation in holding that as far as the cost of the damaged / destroyed goods is concerned, the same is payable by the opposite party namely United India Insurance Company, and the liability of the Global insurer cannot be extended to the said cost of the goods.

19.    The next question which arises for consideration is as to what amount the complainant is entitled from the opposite party.  A perusal of the assessment made by M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd. appointed by UIIC would show that based upon the record provided to him by the complainant, he assessed the gross cost of the goods at Rs.1,25,93,231/-, before the fire.  After making deductions of Rs.88,57,870/- for the seconds goods after washing and line drying, the cost of the stock impacted by fire was assessed at Rs.11,70,74,471/-.  He deducted salvage value of Rs.36,08,260/- from the aforesaid value and assessed the net loss to the complainant at Rs.11,34,56,211/-.  The said salvage value was determined by him on the basis of the tender received for its disposal.

          The sum insured under the two policies bearing number 1019 and 1020 taken by the complainant admittedly being Rs.40.00 crores and the value of the risk at all locations covered under the policy on the date of the loss being Rs.38,84,07,990/- as reported by the surveyor M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd., there was no under insurance. The view taken by this Commission in this regard in its order dated 15.03.2017 was based upon the interim report of the surveyor appointed by the Global insurer and was incorrect.   Therefore, if I go only by the assessment made by M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd. , the complainant would be entitled to reimbursement to the extent of Rs.11,34,56,211/-, though the claim made in the consumer complaint is only for a sum of Rs.9.08 crores.

20.    A perusal of the affidavit of Mr. Kevin Heston Whelan and the final report submitted to his company would show that the salvage was valued by them at Rs.2,60,51,402/-, which was much higher than the value at which the salvage was valued by M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd.  The affidavit of Mr. Kevin Heston shows that the STP policy gave the insurer an option to require the global insurer to pay the salvage value as part of the claim, which it did.  If the salvage value is taken at Rs.2,60,51,402/- at which the damaged goods were retained by the complainant and is deducted from the gross  value assessed by M/s. M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd., without deduction made by them for salvage i.e. 11,70,74,471/-, the balance amount comes to Rs.9,10,23,069/- (Rs. 11,70,74,471/- - 
Rs. 2,60,51,402/-). If the policy excess of Rs.10,000/- is also deducted, the balance amount payable to the complainant on the aforesaid computation would come to Rs.9,10,13,069/-.

21.    As per the alternative (ii) of the final survey report submitted to the Global insurer, the total value of the affected goods on sale cost basis comes to Rs.30,95,91,553/-.  After deducting the manufacturing cost amounting to Rs.12,59,32,342/-, which was also the gross manufacturing cost before the fire assessed by M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd., the difference between the wholesale price and manufacturing cost of the goods came to Rs.18,36,59,211/-.  After making a deducting at 2.5% for obsolete / dead stocks, the gross amount payable by the Global insurer to the complainant came to Rs.17,90,67,731/-.  After a further deduction for the salvage value amounting to Rs.2,60,51,402/-, the net assessed loss on the aforesaid basis, came to Rs.15,30,16,329/-.

22.    If the gross difference between the manufacturing cost and wholesale price after deduction of 2.5% for obsolete / dead stocks, but without deduction of the salvage value, found to be Rs.17,06,77,331/- is added to Rs.11,70,74,471/-, which was the net manufacturing cost of the impacted stock assessed by M/s. Professional Surveyors and Loss Adjusters Pvt. Ltd. after deduction for seconds goods, the aggregate comes to Rs.29,61,42,202/-.  If the salvage value at actuals amounting to Rs.2,60,51,402/- is then deducted from the aforesaid amount of Rs.29,61,42,202, the total loss to the complainant comprising manufacturing cost of the goods and profit i.e. the difference between the wholesale price and the manufacturing cost comes to Rs.27,00,90,800/-.   The complainant having already received a total sum of Rs.19,52,36,535/- (calculated at the exchange rate of Rs.43/- for each dollar), the balance amount which the complainant is yet to receive comes to Rs.7,48,54,265/-. 

23.    Thus, the least of the amount payable to the complainant on the basis of the aforesaid computations comes to Rs.7,48,44,265/-.  The complainant is entitled to recover the said amount from the opposite party along with appropriate compensation in the form of interest.

24.    In his interim report dated 28.7.2008, Mr. Kalyan Prasad Sen, Surveyor and Loss Assessor appointed on behalf of the Global insurer, inter-alia stated as under:

          “13.2 Under the Global Insurers

            13.2.1      On scrutiny of the costing the following calculation procedure are adopted:

          e.g.   if MRP of product say                               Rs.100

                   Less: Average VAT of 4%                       Rs.4

                   Less CST of 2%                                       Rs.2

                   MRP without taxes comes to                  Rs.94

                   Less: Retailers Margin                             Rs.30

                   Wholesale Price                                       Rs.64

          13.2.2        The Insured have indicated that manufacturing cost is Rs.29/- (Indian Rupees) which is a subject matter of verification.  However, at this stage going by the Insured’s records the sale cost is Rs.64/29 i.e. 2.20 times of the manufacturing cost.

          13.2.3        Depending upon the above mentioned calculation, if the Net Adjusted Loss for the Indian Insurers (say for e.g.) comes to 65 million (Indian rupees) on average manufacturing cost basis the wholesale price on weighted average cost would come to 65 million (Indian Rupees) x 2.20 times i.e. 143 million (Indian Rupees)

          13.2.4        Hence the liability under Allianz Global Policy, if no other policy is participating in the loss, should be around INR 143 Million less INR 65 million i.e. 78 million (Indian rupees)

          13.2.5        However, if the loss udner Indian Insurers Policy are to be considered before application of Under-Insurance in that case the Gross Loss would be around INR 100 million (instead of 65 million) and our excess of loss liability on wholesale price basis would be around (INR 220 million less INR 100 million) i.e. INR 120 million which is subject to Excess Clause of 500,000 USD.

          13.2.6        This is the provisional calculation of Probable Maximum Less depending upon our first visit and the said figure is subject to additions / alterations and the amendments depending upon the inputs to be received by us in due course of time.”

          Thus the above referred surveyor stated in his interim report that the wholesale price of the goods was 2.2 times of the manufacturing cost of the goods.  However in the final report the same surveyor assessed the total loss of the complainant at Rs.30,95,91,553/-, whereas the total manufacturing cost was assessed by him at Rs.12,59,32,352/-.  Thus, the multiple given in the interim report was not maintained in the final report, the sale price as per the final report being more than 2.2 times the manufacturing cost.  The above referred final report dated 18.12.2008 of Mr. Kalyan Prasad Sen, surveyor was not made available to this Commission at the time this complaint was initially decided vide order dated 15.3.2017, the same having been filed later on 09.5.2018, after the matter was remanded by the Hon’ble Supreme Court. The affidavit of Mr. Kevin Heston Welhan was filed on 09.5.2018, along with the said report.  There is no direct evidence of the complainant or any of its representatives having informed Mr. Kalyan Prasad Sen that the wholesale selling price of the goods was 2.2. times their manufacturing cost.  During the course of arguments, the learned counsel for the insurer could not point out any statement or document from the complainant showing the wholesale price of the goods to be 2.2 times their manufacturing cost.      Considering  that (i) there is no direct evidence of the complainant having indicated the said multiple  to the surveyor Mr. Kalyan Prasad Sen (ii) this Commission does not have any record to show that the wholesale price of the goods was 2.2 times their manufacturing cost, (iii) the calculation made in the interim report was provisional and subject to additions or alternations and amendments depending upon the inputs to be received in due course of time, and relying upon the final report submitted by the same surveyor on 18.12.2008, I am of the view that it would not be correct to take the wholesale price of the goods at 2.2 times their manufacturing cost.  The view taken by this Commission, while initially deciding this complaint on 15.3.2017, therefore cannot be maintained.

25.    In terms of Regulation 9 of the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interest) Regulations, 2002, a surveyor is required to communicate his report to the insurer within thirty days of his appointment unless, in the special circumstances of a case either due to its special and complicated nature he seeks an extension from the insurer for submission of his report.  In no case, he is allowed to take more than six months from the date of his appointment to furnish his report.  On receipt of the report, the insurer is required to offer a settlement of the claim to the insured within a period of thirty days.  In the present case, there is no evidence of the surveyor appointed by the opposite party having even sought an extension in terms of the aforesaid Regulation from the insurer, though he submitted his final report on 08.8.2009.  The rejection of the claim was conveyed to the complainant vide letter dated 11.9.2009.  Giving maximum permissible time of six months for submission of the survey report and a further period of one month to the insurer to take a decision on the said report, the complainant, in my view, should get interest with effect from seven months from the appointment of the surveyor till the date of payment.

26.    The complaint is therefore disposed of with the following directions:

(i)   The opposite party shall also pay the principal amount of Rs.7,48,44,265/- to the complainant;

(ii)      The opposite party shall also pay compensation in the form of simple interest @ 9% per annum on the aforesaid amount with effect from seven months from the date of appointment of the surveyor till the date on which the payment in terms of this order is made.

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

1. In the facts and circumstances of the case, there shall be no order as to costs.