NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
R.K. Agrawal, President and Dr. S.M. Kantikar, Member
Eastman Exports Global Clothing Private Limited – Complainant
versus
ECGC Limited and Anr. – Opp. Parties
Consumer Case No.826 of 2020
Decided on 22.9.2021

IMPORTANT POINTS
1) Well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer.
2) Fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know.
3) No material on Record to establish that ECGC had notified/informed the Complainant about the exclusion of names Insured Buyers, i.e., M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corp. from list of Insured Buyers as per terms of the Policy

Headnote:

Consumer Protection Act, 2019 – Section 58(1)(a) – Complaint before NCDRC in matters exceeding valuation of Rs. 1 Crore – Multi Buyer Exposure Policy was issued to the Complainant for the 1st time in Sept. 2008, with Max. Liability of Rs.100.00 Crores, valid for 1 year from 01.09.2008 to 31.08.2009 - Policy was renewed every year by ECGC, with same terms and conditions, with same Max. Liability of Rs.100.00 Crores - On 28.08.2017, Complainant submitted proposal for renewal of the Policy on premium amount of Rs.1,74,65,624/- and processing fee of Rs.12,711.86 - On 24.08.2018 another proposal was submitted by the Complainant for renewal of the Policy on premium amt. of Rs.1,68,58,128/- as also processing fee of Rs.12,711.86 - Complainant made exports to M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation btw. 29.05.2018 and 09.10.2018 - Though the said 2 Insured Buyers were not Defaulters but due to Insolvency of these 2 Insured Buyers, payment of exports made to them not received by the Complainant, necessitating the Complainant to lodge a Claim with ECGC - On 05.08.2019 a Claim was filed by the Complainant with ECGC for indemnification of the loss suffered on account of non-receipt of payment of the exports made to the aforesaid two Insured Buyers due to Insolvency proceedings – Claim rejected – Complaint filed - Findings of this Commission: Not in dispute that the Complainant has been obtaining Multi Buyer Exposure Policy from the ECGC since Sept. 2008 till 31.08.2020 covering the risk of non-payment from all Insured Buyers – Well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer - Fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know - No material on Record to establish that ECGC had notified/informed the Complainant about the exclusion of names Insured Buyers, i.e., M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corp. from list of Insured Buyers as per terms of the Policy - Repudiation letter is set aside - There had been Deficient Service by the Opp. Party in repudiating the genuine claim of the Complainant

Held: On 28.08.2017, the Complainant submitted proposal for renewal of the Policy on premium amount of Rs.1,74,65,624/- and processing fee of Rs.12,711.86, which was to be paid by the Complainant on monthly instalment basis. On 28.12.2017 the Policy was renewed by ECGC for the period from 01.09.2017 to 31.08.2018 with the Covering Letter, Policy Bond etc. Before that, as required in the renewal proposal, a List of Current Buyers was provided by the Complainant to ECGC. The Aggregate Loss Limit (ALL) mentioned in the Covering Letter was Rs.100.00 Crores and Loss Limit was stated to be 10% of Aggregate Loss Limit (ALL). The Covering Letter issued by ECGC, inter alia, stated the Insured Buyers, which included M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation, having address at United States. The Covering Letter further stated that the coverage was not available for those Buyers, whose names were included in the Defaulter Buyers List. However, no Definition or otherwise Explanation of the Defaulter Buyers List was provided in the Policy issued to the Complainant.

On receipt of a communication dated 16.10.2018 from the said Insured Buyers that they have filed for Bankruptcy with the United States Bankruptcy Court for the Southern District of New York on 15.10.2018 (Annexure IV), on 20.10.2018 the Complainant filed a Pre-Petition Claim of US $ 3943102.96 with the said United States Bankruptcy Court. However, despite assurances from the Insured Buyers and said Pre-Petition Claim, the payment of exports was not made to the Complainant and the Bank, which had discounted the export bills, started insisting for payment from the Complainant. The Complainant informed the Bankers regarding Bankruptcy proceedings initiated by the Insured Buyers and also repaid the entire outstanding amount to the Banks by 15.07.2019, otherwise Complainant’s account would have been declared Non-Performing Asset (NPA) by their Bankers, restraining it from availing further banking facilities. The details of the payment made by the Complainant to the Banks for discounted amounts of export invoices have been annexed as Annexure VI colly with the Complaint.

On 05.08.2019 a Claim was filed by the Complainant with ECGC for indemnification of the loss suffered on account of non-receipt of payment of the exports made to the aforesaid two Insured Buyers due to Insolvency proceedings and also furnished the documents and clarifications sought for by ECGC for processing the Claim by 04.11.2019.When there was no response from ECGC in the matter, the Complainant sent an Email dated 21.01.2020 to the Chairman-cum-Managing Director of ECGC and requested for early settlement of the Claim.

We have heard Mr. Devesh Tripathi, learned Counsel for the Complainant, Mr. Bharat Sangal, learned Sr. Counsel for the ECGC and given a thoughtful consideration to the arguments advanced by them.

It is not in dispute that the Complainant has been obtaining Multi Buyer Exposure Policy from the ECGC since September 2008 till 31.08.2020 covering the risk of non-payment from all Insured Buyers, which included M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation, having address at United States. As per Covering Letter issued by ECGC coverage was not available for those Buyers, whose names were included in the Defaulter Buyers List. However, no Definition or otherwise Explanation of the Defaulter Buyers List was provided in the Policy issued to the Complainant. The Complainant exported goods worth Rs.9,84,99,894.07 to M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and Rs.16,65,19,308.70 to M/s. Kmart Holding Corporation between 29.05.2018 and 09.10.2018, i.e., during the currency of the Policy. Though the said two Insured Buyers were not Defaulters but due to Insolvency of these two Insured Buyers the payment of the exports made to them was not received by the Complainant. On claim being filed, the ECGC rejected the claim on the ground that the two buyers, i.e., M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation were excluded from the purview of the cover from 01.02.2017.It is the case of the Complainant that they were never informed / given notice about the inclusion of the two buyers, i.e., M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation in the Defaulters List w.e.f. 01.02.2017.It is an afterthought and ECGC cannot take shelter of this frivolous ground for rejecting their genuine claim.

From the aforesaid decisions of the Hon’ble Supreme Court, the following two Principles emerge:-

(i) There is no difference between a contract of Insurance and any other Contract, and that it should be construed strictly without adding or deleting anything from the terms thereof.

(ii) It is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since the obligation of good faith applies to both equally.”

Applying the Principles laid down by the Hon’ble Supreme Court referred to above, to the facts of the present case, we find that there is no material on Record to establish that the ECGC had notified / informed the Complainant about the exclusion of the names Insured Buyer, i.e., M/s. Sears, Roebuck & Co. T/S Sears Hometown Store and M/s. Kmart Holding Corporation from the list of Insured Buyers as per terms of the Policy. Thus, the ground that the names of the Insured Buyers were included in the BSAL on the date of Claim, on the basis of which the Opposite Party Insurance Company had repudiated the Insurance Claim of the Complainant, cannot be sustained as the Opposite Party Insurance Company had not followed the procedure laid down under the Terms and Conditions of the Policy. The Repudiation letter is, therefore, set aside. There had been Deficient in Service by the Opposite Party Insurance Company in repudiating the genuine claim of the Complainant. (Paras 11, 14, 15, 24, 25, 32 & 33)

Result: Complainant is entitled to full Claim of Insurance made for loss due to insolvency of two Insured Buyers. Opp. Party/Insurance Co. directed to pay the Claim amt. of Rs.26,50,19,203/- (Rupees Twenty Six Crore Fifty Lakhs Nineteen Thousand Two Hundred and Three only) to the Complainant alongwith interest @9% p.a.