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An error does not become truth by reason of multiplied propagation, nor does truth become error because nobody sees it. Mahatma Gandhi Ji
Learn thoroughly whatever is to be learnt; Then, let the conduct be worthy of his learning. Thirukural 391 Even if you are a minority of one, the truth is the truth. Mahatma Gandhi Ji Most of them follow nothing but conjecture, and conjecture is no substitute for the truth. God is fully aware of everything they do. (Quarn 10:36)
And you will know the truth, and the truth will make you free. (Bible John 8:32) Change is vital, improvement the logical form of change. James Cash Penney
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INTRODUCTION
The title may seem odd. Is it ever possible that Marine Hull Insurance, which dates back to ancient times in the great maritime Country, will be demolished? Is the question, whether Marine Hull Insurance in India is on a Funeral Voyage relevant? From the very day that the Marine Hull Tariff in India was jettisoned in the name of a level playing field, to bring in competition for the good of the Shipowner Assured, the very opposite of what was intended is being achieved slowly but surely! The phenomenon may rightly be called the Lord Shiva Effect demolition and destruction, prior to rising like the Phoenix from the ashes. When will demolition be complete? The day is not far off! With Tariff Rates for Marine Hull Insurance dropping by 90% in a period of about five years, the portfolio has become unviable from an economic point of view. Two Insurance Companies have closed their books on Marine Hull Insurance and one has decided to go slow in writing Marine Hull business. What does one do when loss ratios exceed hundreds of percent? Simple turn down valid claims with the assistance of a few unprofessional insurance intermediaries. When underwriting descends to the depth of undertaking, the future Hull & Machinery Policies would have a simple warranty, It is warranted that any Claim would only be paid, (with interest) when and only when the Supreme Court of India gives its Judgment on the Claim. The above may sound sarcastic and insinuating. However, the reader may decided for himself or herself, whether or not the Case of Very Large Oil / Ore Carriers VLOO ARUN, (hereinafter referred to as Vessel), is a cause for concern of all those connected with Marine Hull Insurance Shipowners, Insurers and other Insurance Intermediaries. Briefly, the Vessel was purchased by M/s. Priya Blue Industries Pvt. Ltd., a Ship-breaking Company, (hereinafter referred to as Assured) for scrapping at Alang, Gujarat. The Vessel was insured for the funeral voyage (a term used to describe a the last voyage of a ship for demolition), by The New India Assurance Company Ltd., (hereinafter referred to as Insurer), under a voyage policy on Total Loss Only terms for a sum insured of Rs. 25,70,00,000/- (Rupees Twenty Five Crores Seventy Lakhs Only) for a Premium of Rs. 1,14,280/- (Rupees One Lakh Fourteen Thousand Two Hundred Eighty Only). On 09-Jun-97, the Vessel commenced its funeral voyage but before she could reach the designated plot for beaching, ran aground on a rock, broke her back and became an actual total loss. The incident was intimated by the Assured to the Insurer who appointed M/s. Transocean Marine and General Survey Agencies (hereinafter referred to as First Surveyor) to survey and report on the loss. The First Surveyor in their Report dated 24-Jun-97, concluded:
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In accordance with Marine Hull Law and Practice, the Assured appointed M/s. Tony Fernandez Average Adjusters Pvt. Ltd., (hereinafter referred to as Average Adjuster), as the Average Adjuster. The Assured informed Insurers of such appointment and the Insurer confirmed the appointment of the Average Adjuster in their letter of 05-Aug-97. In the Statement of Adjustment the Average Adjuster confirmed that there was liability under the Policy of Insurance and recommended the claim to be settled for Rs. 13,69,00,000/- that is, net of the sale proceeds of the Vessel in a public auction. The basis for preparing the Statement of Adjustment was the Survey Reports both of both the First Surveyor and the Second Surveyor in addition to other claim documents. The Insurers referred to the matter to another Surveyor, (apparently unofficially), since he was not officially appointed for the Claim. This Surveyor, on an un-numbered, and unsigned letterhead of his firm, gave the Insurer a Note tilted Points To Ponder wherein he recommended repudiation of the Claim on grounds which have no basis in law. The Insurers apparently took his advice and repudiated the Claim, discarding the opinion of two Surveyor appointed by them and further, ignoring the Statement of Adjustment of the Average Adjuster, whose appointment the Insurer had approved.
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The National Commission in their Order dated 19-May-05, under the Caption Findings, states as follows:-
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It is to be noted that the amount of the Claim in the Judgment of the National Commission, is identical to what the Average Adjuster had recommended in the Statement of Adjustment.
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The Two Judge Bench of the Supreme Court of India comprising of Judge B. Sudershan Reddy and Judge Surinder Singh Nijjar heard concluded their Judgment dated 09-Mar-11, wherein both Appeals were dismissed by stating in five simple words:
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It is to be noted, that the Two Judge Bench of the Supreme Court of India upheld the National Commissions Order both in terms of liability under the Policy and also with regard to the quantum of liability. The Commissions Order was based amongst other things, on the Average Adjusters Statement of Adjustment, which disallowed claims pertaining to Sue & Labour of the Assured, which were not substantiated. Both the National Commission as well as the Supreme Court of India upheld the Statement of Adjustment on aspects of liability and as well as the quantum thereof.
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CONCLUSION
The purpose of this note is not to point fingers or blame anyone in particular or the General Insurance Sector in general, but to draw attention to the what lies ahead if no corrective action is immediately taken. Everyone who is committed to a professional approach to Marine Hull Insurance in India the Regulator IRDA, the Insurance Companies (both Public and Private Sectors), the Shipping Companies (large and small), and Insurance Intermediaries Insurance Brokers, Risk Management Consultants, Insurance Surveyors, Average Adjusters and Claims Consultants, must consider the Judgement as a wake-up call for corrective and preventive action. If introspection is made by all us who have a stake in Marine Hull Insurance in India, we will realise that the twin viruses of IGNORANCE and ARROGANCE are the root causes of the cancer, which is wasting away the Marine Hull Portfolio in India. The only antidotes for two deadly viruses of Ignorance and Arrogance, are according to our ancient Vedas, firstly, Aajeevan vidyarthi (Be a Life Long Learner) and Vidyadhanam sarvadhana pradhanam (The best gift we can give others is our knowledge). As the Insurance Industry sailed from the days of pre-nationalization to nationalization and continued the voyage into privatization, several gradual changes (all for the worse) that has afflicted the Insurance Industry, with specific reference to Marine Hull Insurance, which is a very specialized branch of Insurance. What were these changes? Specialization in Marine Hull Insurance gave way to dilution of expertise and experience after nationalization due to the concept of job rotation in the name of Human Resource Development (HRD), which in the light of what has happened can only mean Human Resource Dilution! The Claims Adjuster who was the in-house expert of every insurance company that wrote marine hull business is not extinct. Reliance is now being placed by Insurers on insurance intermediaries like Surveyors or Average Adjusters for decision making on claims. There are some responsibilities that cannot be delegated and decision making on claims is one of these. The impact of vigilance and the threat of receiving a memo just before retirement, (thus stalling the receipt of Provident Fund and Gratuity) has in no small measure added to the fear psychosis of decision makers, especially with regard to insurance claims. Some unscrupulous and unprofessional surveyors have taken advantage of this situation to make themselves judge and jury of marine hull claims.
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Average Adjuster, Incident Causation Analyst, Risk Management Consultant, Valuer, Mediator, Mentor & Learning Facilitator
405, Vyapar Bhavan, 49, P. Dmello Road, Carnac Bunder, Mumbai 400009 Office Tel. No. : (+91 22) 2373 3818 Cell No. : (+91) 93211 92110 or (+91) 98921 92110 Email: tonyfernandez_99@yahoo.com
Enclosures: 1. Annexure A An Average Adjusters Prayer. 2. Annexure B Curriculum Vitae of A.W.J. Fernandez, Average Adjuster. 3. Annexure C The Judgement of the National Commission. 4. Annexure D The Judgement of the Supreme Court of India.
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