Observing that insurance is to secure an indemnity against accidents, the Madras High Court has said the claim of a shipping company for compensation from an insurance firm for the loss it suffered in tsunami is maintainable.
"We are unable to accept the argument of the insurance company that earthquake is the proximate cause for the damage of the barges", a division bench comprising justices R Sudhakar and S Vaidyanathan said in a recent order dismissing an appeal filed by United India Insurance Company Limited against an order of a single judge to pay compensation to the shipping company.
The matter relates to insurance contract entered by S B K Shipping Private Limited with the United India Insurance Company Limited for insuring its four barges.
The Clause 4 of the contract states that the insurance covers loss or damage caused by perils of the seas, rivers, lakes or other navigable waters.
Four barges of the shipping company, anchored in Cuddalore harbour, got damaged in the 2004 tsunami for which the company made a claim of Rs 14,13,410.
The insurance company repudiated the claim holding that the proximate cause of tsunami was earthquake, which was not covered under the Institute Time Clauses (port risk).
Questioning it, the shipping company filed a plea in the Madras High Court and a single judge favoured it, against which the insurance firm filed an appeal.
In the appeal, the insurance firm contended that tsunami has been caused only due to earthquake.
"In this case we have no hesitation to accept the shipping company's plea that the loss was caused due to the peril of the sea (tsunami) and that is the proximate cause", the bench said.
The counsel for shipping company submitted that "even assuming that the cause of tsunami was earthquake, it occurred off the coast of Sumatra in Indonesia. The said earthquake caused giant waves which destroyed the barges, which is a peril of sea."
"We find no ambiguity in the marine insurance policy and the barges in this case has suffered due to the peril of sea, namely tsunami", the bench said.
"We have no hesitation to accept the claim of the shipping company that the damage was caused to the barges due to the ravages of the sea is an admissible claim, which falls with the contours of perils of sea", the bench said dismissing the appeal of the insurance firm.
