‘Tsunami-affected shipping company eligible for insurance’

Chennai

A division bench comprising Justice R Sudhakar and Justice S Vaidyanathan, which dismissed the appeal moved by an insurance firm against a single judge’s order, said “We are unable to accept the argument of the insurance company that earthquake is the proximate cause for the damage of the vessel. On the contrary it is the remote cause. If tsunami, a peril of the sea, is the direct cause for damage, there is no need to embark on further enquiry as to what is the proximate cause of tsunami. It is certainly earthquake. The proximity is in relation to the damage and if the claim answers the same it is maintainable.”

2006 tsunami damaged barges

SBK Shipping Private Limited, Cuddalore Harbour, had insured four of their barges with United India Insurance Company Limited, against damages. Following the massive tsunami on December 26, 2004, which hit the shores of South Asia killing lakhs of people and destroying properties worth crores, the company made a claim of Rs14.13 Lakh for the loss of its four barges. But the insurance company vide its proceedings on March 27, 2006, repudiated the claim of the shipping company holding that the proximate cause of tsunami is earthquake, which is not covered under the Institute of time clauses - Port risk.

Earthquake not covered

The company had submitted that as per Clause 4 of the contract, the insurance covers loss or damage to the subject matter caused by perils of the seas, rivers, lakes or other navigable waters. It also covers loss caused by other actions such as fire, violent threat and piracy. However, as per Clause 5 of the contract, the insurance shall not cover loss, damage, liability or expenses caused by earthquake or volcanic eruption.  

Questioning the same, the shipping company moved a writ petition, which was favoured by a single Judge of the Madras High Court. The insurance firm filed an appeal against the single judge’s order. It argued that since tsunami has been caused only due to earthquake, the damage to the barge was proximately caused by earthquake, which is an exclusion and therefore the claim was rejected. Shipping company’s counsel argued that even assuming that the cause of tsunami was earthquake, the earthquake occurred off the coast of Sumatra in Indonesia and the said earthquake caused giant waves which destroyed the barges, which is a peril of sea.