Insured Duty Bound To Disclose All Material Facts,: NCDRC Sets Aside State Commission's Order Against ECGC

Brief Facts of the Case

The complainant company, engaged in onion exports, obtained an insurance policy for ₹8 crore from ECGC of India/insurance company to cover losses during exports. The company received an order from a Vietnamese buyer and shipped four consignments. While the first two consignments were delivered, the buyer later requested to halt the remaining shipments due to financial issues, without initially raising any quality concerns. However, by then, the remaining consignments had already been dispatched. To minimize losses, the complainant sought permission to resell the goods, which the insurance company declined but allowed alternative actions to reduce the loss. The consignments were sold to other buyers, and the loss was assessed at ₹48,70,234. The complainant filed a claim under the policy, which was rejected by the insurance company on grounds of a quality dispute and alleged violation of insurance principles by concealing material facts. Despite multiple communications, the claim remained unresolved. Aggrieved, the complainant filed a case with the State Commission of Maharashtra, seeking compensation for the loss, interest, and additional damages. The State Commission allowed the complaint and directed the insurer to pay ₹48,70,234 for losses, ₹5,00,000 for mental distress, and ₹50,000 as litigation costs. Aggrieved by the State Commission's order, the insurer filed an appeal before the National Commission.

Contentions of the Insurer

The insurer argued that the complaint involves complex issues requiring the presence of Viet Onion Import Export Co. Ltd.-Vietnam. They claimed the complainant misrepresented facts to the buyer, falsely stating that shipments had already been dispatched, and deliberately sent an additional shipment despite instructions not to. The insurer alleged a breach of the principle of utmost good faith, as the complainant concealed material facts, including unresolved payment disputes and quality issues raised by the buyer. They also stated the complainant failed to retrieve the goods and attempted to mislead both the buyer and the insurer. Furthermore, the insurer contended that the complainant does not qualify as a consumer under the Consumer Protection Act and denied any deficiency in their service.

Observations by the National Commission

The National Commission observed that the insurer's repudiation of the claim was valid, supported by several key judgments. In Oriental Insurance Co. Ltd. vs. Sony Cherian, the Supreme Court emphasized strict interpretation of policy terms and the obligation of policyholders to comply with all conditions. Similarly, in M/s BHS Industries vs. Export Credit Guarantee Corp. Ltd., it was held that claims must align with policy requirements, and disputes must be resolved legally to establish liability. Furthermore, the principle of utmost good faith, established in Carter vs. Boehm, underlines the insured's duty to disclose all material facts, which was breached in this case. Additionally, M/s Cosmic Trends Pvt. Ltd. vs. ECGC & Ors. reaffirmed that suppression of material facts or failure to adhere to policy clauses justifies claim denial. The insurer's actions denying liability for sales to alternate buyers, was consistent with these precedents. The National Commission set aside the State Commission's order and dismissed the appeal.

Case Title: ECGC of India Ltd. Vs. Blossom Grocery & Foods India Pvt. Ltd.

Case Number: F.A. No. 2344/2019

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