Minimising losses

This post is not about the loss minimisation measures which have to be followed by an insured or an insurer under a cargo insurance policy. It is also not about specific loss minimisation measures taken in case of a particular type of cargo or in a particular claim. It is more to do with the term ‘Loss minimisation’ itself.

It was during my days with a government-owned insurer. The most important client of our office was a large corporate house, one of the top companies in the field of agro-chemicals and an organisation renowned for their straightforward dealings. The company had plants in different part parts of the country and the whole insurance portfolio was managed by us as lead insurer with another company as a co-insurer. Remember, there were no brokers at that point in time in India.

The client had sent a truckload of expensive chemicals from their plant in north India to another destination in the north. All their marine cargo open policies including the ones for inland movement of finished goods were issued by us. As ill-luck would have it, the truck carrying the expensive chemicals was hijacked at gun-point and the crew of the truck were beaten up, tied and left by the wayside. A few days later the truck was found abandoned but with the entire cargo missing. The insured lodged a claim on us and submitted some of the documents, even as we sent them the complete list of requirements, including lodging a monetary claim on the carrier and holding them responsible.It was a fairly large claim at that time of around INR 4.5 million.

It was about a month later, that the Risk manager of the insured called up to say that the material had been recovered. We were happy that there would be no claim and asked him how did the recovery happen so quickly. The details narrated by him read like a thriller:

The transporter who owned the truck had been transporting our insured’s goods for over 20 years and there had never been a single instance of loss of this nature. The cited instance being the first and although neither the transporter nor his crew were in anyway connected to the hijack, the transporter had taken it to be a slur on his reputation. He had not stopped with filing a FIR with the police but used his clout to speed up the investigation. On the basis of some leads obtained, the transporter booked air-tickets for himself and the police team to Mumbai and also spent on their boarding and lodging. The results were astounding — The kingpin of the hijacking racket was a big businessman in Mumbai and he was arrested. A greater part of the stolen material was recovered from a warehouse in Mumbai and the cash obtained from selling some portions too was seized. The transporter did not stop with this but used his power, resources and what not to ensure that the police present the seized material and cash in Court. The Court happened to be in a north Indian city and so the transporter spent money on transporting the recovered material too. Then he managed to prevail on the Court that this case should be taken up on priority and with the presence of the insured in Court to identify the material as their own, orders were passed and the material plus cash was quickly handed over to our insured. Sounds too good to be true? The transporter managed to speed up the government machinery, primarily to keep up his reputation with our insured.

Now came the insurance angle. The insured had orally said that they would withdraw the claim. The very next day, the Risk Manager was on the line saying that the Top management of his company was extremely pleased with the approach and commitment shown by the transporter in ensuring that their stolen material was recovered. They wanted that he be rewarded for his efforts. Risk Manager put up the question — Can the expenses incurred by the transporter in pursuing recovery be paid as Loss minimisation expenses by us? The amount would be but a small portion of the value of the goods which we would have paid, had the recovery not happened. We first tried to put him off by saying that most of the expenses incurred by the transporter would not be supported by vouchers/bills. The reply to this was whether we could consider the airline tickets, hotel bills, etc. Finally, we had to tell our insured that the Minimising Losses clause forming part of the Inland Transit Clauses -A could respond only in cases where the said expenses were incurred by the assured, their servants or agents and a transporter would not fall under any of the above. Further, the Not to Inure clause too prohibits the benefit of this insurance to be availed by a carrier. Above all, primarily it is the duty of any carrier to transport goods from one place to another in safe and sound condition. So although we too appreciate the efforts taken by the carrier for recovering the stolen material, the policy would not respond.

The assured did not create a fuss and withdrew the claim. Possibly, the company management rewarded the transporter in some other way.