Is assignment a bar to being treated as a consumer?

When a marine cargo policy had been assigned in favor of the buyer, can the original insured approach a Consumer Court to seek relief for non-payment of a claim? This was the fundamental issue decided upon, by the Supreme Court in June 2016, the case being – United India Insurance Co. Ltd vs Leisure Wear Exports Ltd.

This was an appeal filed by United India Insurance Co. Ltd before the Supreme Court against the judgement given by the State Consumer Disputes Redressal Commission, Punjab & upheld by the National Consumer Disputes Redressal Commission.

Details of the case before the SCDRC were as follows — Leisure Wear Exports Ltd. Ludhiana, were in the business of sale (both domestic and exports) of hosiery goods and garments. They had purchased a Marine Open policy from United India Insurance for the period June 1996-June 1997 for a sum insured of INR 2 crores. The policy was on ‘All-Risk’ terms with Institute Cargo clauses -A, Institute War clauses (Cargo), Institute Strikes clauses (Cargo), Inland Transit clause-A and Strikes, Riots & Civil Commotion clause.

Those were the good, old days, when the war between Russia and Ukraine had not broken out and there were no sanctions imposed on Russia. Leisure Wear Exports had received an order for export of hosiery goods and readymade garments to Magna Overseas, Moscow and, this was shipped under two separate consignments during the space of one week, with due intimation to the insurer. The consignments were shipped from Mumbai port to Odessa, Ukraine and, from there, moved by road to Moscow. The policy/certificates had been duly assigned in favor of Magna Overseas. When the consignments reached Moscow, huge shortages were noticed from both consignments. The claim was reported to the insurer, who directed the claim be reported to Ingosstrakh Insurance Company as they were the settling agents. The surveyor appointed by Ingosstrakh confirmed the short delivery, but the claim remained unsettled. This was when the consignee, Magna Overseas, in July 1997, authorized Leisure Wear Exports to proceed against the insurer, for recovery of the claim amount. Leisure Wear Exports filed a petition before the SCDRC, Punjab and the judgement was in their favor. This decision was contested by the insurer, United India Insurance Co before the NCDRC, that upheld the decision by the State Commission. It was then, that United India brought this appeal before the Supreme Court, stressing on the same fact, (as argued earlier before the Consumer Courts), that once assignment of a marine cargo policy had been done, the assignor (insured) had lost all their rights & interests under the policy and did not have the locus to file a complaint against the insurer, seeking realization of claims under the policy. The existence of the policy, the claim for shortage, etc. was not disputed by the insurer.

The two-bench judges of the Supreme Court, in June 2016 dismissed the appeal of United India Insurance Co. Ltd and upheld the decisions of the SCDRC and confirmed by the NCDRC. Their reasoning was as under:

The appellant had not challenged the findings into the merits of the case. Their only argument was that post-assignment, the insured had no rights or interests under the policy. The Supreme Court quoted Section 17 of the Marine Insurance Act, 1963 — “Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect. But the provisions of this section do not affect transmission of interest by operation of law.”

It was not disputed that there was no express agreement between Leisure Wear Exports Ltd & Magna Overseas, whereby the former agreed to transfer their rights under the insurance policy to the latter. Section 17, in terms, recognizes and permits the insured to make assignment of their contract of insurance policy in favor of an assignee and at the same time allows the insured even after making an assignment to retain all those rights which are available to them under the contract of insurance with the Insurer (appellant). In other words, in terms of Section 17, even after making an assignment by the insured of their contract of insurance policy, the rights of insured under the contract of insurance policy are not assigned in favor of assignee by the deed of assignment but they are continued to remain with the insured.

The next line of argument by the counsel for the appellant was that there was an implied agreement through which Leisure Wear Exports had transferred all their rights under the policy to Magna Overseas. The Court found no merit in this argument. However, the Court said that, even for the sake of argument, if we agree that there was indeed an implied agreement, the very fact that Magna Overseas had, vide their letter of July 1997, authorized Leisure Wear Exports to proceed legally against United India Insurance Co Ltd, makes it clear that Leisure Wear Exports had the locus to file a complaint against the appellant seeking realization of the claim proceeds.

Good judgement, no doubt, but it had taken 20 years. Who is to be blamed? The appellant, the lawyers for the appellant or the Court?