Ignorance? Intentional?

A friend of mine who is a broker called me. ‘ Either I have lost my mind or the rules of Marine cargo insurance have changed’, he said. He sounded quite upset yet in a wee bit of doubt and hence the poser to me. I calmed him down and asked him what the issue was.

His narration : One of his esteemed clients had purchased a machine valued at INR 32 million from the original equipment manufacturer in India. My friend had helped place the inland transit insurance policy with one of the Government-owned insurers. As ill-luck would have it, the trailer laden with the insured machine met with an accident and the machine suffered damages. Spot survey was arranged and it was agreed that the damaged machine had to be repaired with some parts replaced. The machine was sent back to the original manufacturer and the cost of replacement and repairs was estimated at INR 4 million. Manufacturer agreed that as the damaged machine was being repaired by them, the standard warranty given for the machine would continue after repairs and renewal.

The manufacturer had in turn outsourced the repairs to a regular service provider/job worker. Machine was duly repaired and sent to the insured’s premises directly by the service provider. The manufacturer raised an invoice for INR 4 million which was paid by the insured.

Now started the problem. The loss assessor visited the insured’s premises to check the repaired machinery and the accompanying documents. One of the document seen was the E-waybill prepared by the service provider which showed the value of repairs and renewals at INR 3.2 million. Accompanying it was a copy of the invoice raised by the service provider on the manufacturer for the same INR 3.2 million. Now the loss assessor started saying that he would allow INR 3.2 million only under the claim and not INR 4 million which the insured had paid towards repairs to the manufacturer. My broker friend and the insured had tried explaining to the loss assessor that their contract was with the original manufacturer and they had nothing to do with the service provider. Further the invoice for INR 3.2 million was raised on the manufacturer and not on the insured. Their arguments had fallen on deaf years. When they had taken up with the insurer, the response was that they should try and convince the loss assessor and they could do nothing.

Now I could understand my friend’s self-doubts. Assured him that his understanding was correct but wondered to myself if this was a case of ignorance of the loss assessor/ insurer of business practices on the ground or was it an intentional ploy to reduce liability under the claim.