Re:Order of Insurance Regulatory and Development Authority of India, undersub-section 6 of Section 64UM of Insurance Act, 1938

Inthe case of Claim of Alleged Loss due to fire accident to ship M.V.AmsterdamBridge on 09.09.2012 covered by Open Marine Cargo Annual Turnover policyno.-36010021120500000001 for the period 06.05.2012 to 05.05.2013- Nectar LifeSciences Limited, Chandigarh (Insured) New India Assurance Co.Ltd, Ludhiana(Insurer)

ThisOrder under Section 64UM(6) of Insurance Act,1938, is being issued incompliance to the Order dated 03.01.2018 of Securities Appellate Tribunal (SAT)Mumbai, in Appeal No. 2 of 2017, directing this Authority to pass a freshorder on merits and in accordance with law.

Factual Matrix:

(a)Arising out of Civil Writ Petition (CWP) No.26803 of 2014 before Hon’ble HighCourt of Punjab and Haryana at Chandigarh filed by Nectar Life Sciences Ltdagainst The New India Assurance Co. Ltd and others, the Hon’ble Court vide itsjudgement dated 24.12.2014 had directed the insurer to communicate the decisiontaken on either accepting or repudiating the claim of the petitioner, within aperiod of six weeks from the date of receipt of copy of the order. It is notedthat the Insurer repudiated the claim on 07.01.2015 stating the reason that theloss is out of the scope of the Marine Cargo Policy.

(b)The Insured again filed a WP No.16847 of 2015 before Hon’ble High Court ofPunjab & Haryana and alleged that the Surveyor and Insurer breachedRegulations 13A(2),(3),(4) & 13(2)(xii), (xv) and (3) of InsuranceSurveyors and Loss Assessors (Licensing, Professional Requirements and Code ofConduct) Regulations, 2000 by being arbitrary and by inordinately delaying theissue of Survey Report, by calling for addendum to Survey Report withoutintimating to the Insured and by not seeking necessary expert opinion beforeconcluding on the cause of loss. The Hon’ble High Court, on 17.08.2015,directed the Authority to decide on the appointment of a second surveyor underSec.64UM (3) of the Insurance Act, 1938 preferably within four months’ time.The Authority vide its order IRDAI/NL/ORD/MISC/2013/10/2016 dated: 18.10.2016decided not to appoint a second surveyor.

(c)The order of the Authority rejecting the insured’s request to appoint a secondsurveyor was challenged by the insured before Hon’ble SAT at Mumbai in AppealNo.2 of 2017- Nectar Life Sciences Ltd (vs) IRDAI & Others. The Hon’ble SAT,vide order dated 03.01.2018, disposed of the appeal with a direction to IRDAIto appoint a Surveyor having the relevant technical expertise and based on the report,pass a fresh order on merits and in accordance with law. IRDAI appointed RakeshNarula & Co, Vadodara (SLA No.6064) (Surveyor) vide its ref:IRDA/NL-Reg/SAT/02/2017 dated: 16.04.2018, under Section 64UM (3) (pre-amended;post amendment 64UM (5) of the Insurance Act 1938). The surveyor has submittedthe Survey Report vide RNC/IRDAI/2018/2002 dated: 04.09.2018.

(d)The Surveyor i.e. Rakesh Narula & Co, has in its concluding remarks at14.0- Non-Admissibility of the Claim made the following observations: -

“14.1Based upon all what has been written in the report above, it is establishedthat the loss reported to have been suffered by the Insured is not at allattributed due to the subject incident of fire which had occurred on the shipMV Amsterdam Bridge. Insured has alleged that the fire on the ship lead to thedeterioration in quality is not correct in our independent opinion, as per ourexamination of all facts and information related to the claim.

14.2Also the Insured had mentioned that the cargo would be shipped in Ship MV KotaLagu but it was shipped in MV Amsterdam Bridge, without the intimation to theInsurer.

14.3Due to all the various serious nature of so many discrepancies that have allbeen explained at length in the body of this report, we independently opinethat the Insured’s claim is not admissible and it is not at all payable, as perthe Policy terms and conditions.

14.4Insured have also not been able to substantiate and prove their claim nor theyhave been able to provide the correct Product Identification, correct ProductMSDS and also not provided the Product Stability characteristics,Stoichiometry, Product Literature, Product R&D data. Further no firmgrounds of rejection by consignee have been provided, no tests have beencarried out by the consignee and no visual fire effect has been found anywhereon the container, drums and the material contained in the subject consignment.

14.5Insured also have not been able to conclusively establish the root cause of thealleged loss / damage.

14.6The Insured have also not been able to prove that the loss is covered under thePolicy terms and conditions and hence as the loss is not admissible and asthere is large un-clarity of the product shipped as well as reprocessing costdocuments, input output details and expenses incurred supporting documents havenot been submitted, we have not gone into the loss assessment on reprocessingbasis.”

(e)As regarding the cause of loss, the surveyor made the following remarks in theconcluding part of 13.2.6

“Thepurity of samples collected by the surveyor post the return of the consignmentsshowed a continuous decline. According to the insured, this is due to inherentcharacteristic of product that once it degrades a little, the process continuesand the purity continues to decline. As per our independent assessment thealleged decline of quality cannot be attributed to the fire on the ship. Sothe alleged quality loss is due to either non-use of refrigerated container asapplicable for Menthol USP consignments or it was some inherent vice of theproduct itself, which has led to the quality loss over a period of time.”

(f)The relevant exclusions of the insurance policy are also reproduced by thesurveyor at 14.7, as follows: -

4.In no case shall this insurance cover

TheMenthol USP was mentioned on the Labels affixed on the Drums contained in theconsignment. As per MSDS provided, Menthol is supposed to be carried in a Refrigeratedvessel which was not done. Further Menthol USP is not a licensed product ofNectar and they have actually shipped Menthol in Liquid form whereas theshipping documents sent by them showed it to be Menthol USP.

Theactual product shipped had some inherent vice, since the insured, themselveshave admitted that they were after the surveyor for giving them the permissionto quickly reprocess the returned consignment, since the quality of the same isgetting deteriorated with the passage of time.

Eventhough 2 years shelf life guaranteed by the Insured had not been over, still bytheir own admission, even though 2 years were still not over, they have allegedthat with time, the quality is going down, which clearly is an admission by theinsured that the product is having an inherent vice and that with time delay,it is deteriorating, whereas the Shelf Life had been guaranteed by Nectar for aperiod of 2 years from the date of manufacturing.

(g)I have gone through the Surveyor’s Report dated 04.09.2018 carefully and findno reason to disagree with the conclusion reached by the surveyor. Therefore,after consideration of the Survey Report submitted by the Surveyor RakeshNarula (SLA-6064), IRDAI, in exercise of the powers under section 64 UM(6) ofInsurance Act, 1938, decides that the Claim is not payable. Accordingly, the Insureris directed to comply with this direction immediately, and issue the necessarycommunication to the Insured.

(P.J.Joseph)

Member (Non-Life)