Marine insurer liable for log cargo loss despite vessel unseaworthiness under Institute Cargo Clause coverage

SC allowed appeal in marine insurance case involving log cargo claim. Division Bench HC erroneously held insurance policy terminated after vessel became unseaworthy at Singapore Port, but SC found no automatic termination occurred. Policy covered non-delivery risks and vessel stranding under Institute Cargo Clause (C) with additional endorsements. Insurer failed to prove exclusionary clauses applied, bearing burden of proof. Court applied principle favoring insured in policy interpretation ambiguities. Single Judge's findings restored, crediting auction proceeds against total loss claim. Appeal succeeded, Division Bench judgment set aside.

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Issues Involved:
1. Whether the suit was barred by limitation.
2. Whether the policy of insurance was an all-risk policy.
3. Whether the policy covered constructive total loss.
4. Whether the exclusion clauses in the policy are applicable in the facts of this case so as to repudiate the claim of the appellant.

Issue-Wise Detailed Analysis:

1. Limitation:
The appellant lodged its claim on 24th June 1988, which was repudiated by the insurance company on 8th July 1988. The suit was filed on 7th August 1992. The Division Bench held that the repudiation of the claim on 8th July 1988 and subsequent correspondences marked "without prejudice" did not extend the limitation period. However, the Supreme Court noted that the actual repudiation was made on 1st April 1991, and thus, the suit filed on 7th August 1992 was within the period of limitation as per Article 44 of the Limitation Act, 1963.

2. All-Risk Policy:
The Division Bench opined that the policy was not an all-risk policy and that the exclusion clause contained in Clause 4.6 would operate. The Supreme Court, however, noted that the contract of insurance was covered under Institute Cargo Clause (C) and included the risk of non-delivery of even a single piece of log. The policy was extended to include the risks of theft, pilferage, and non-delivery, which was overlooked by the Division Bench.

3. Constructive Total Loss:
The learned Single Judge found that there was a constructive total loss as defined in Section 60 of the Marine Insurance Act, 1963. The Supreme Court noted that the goods were reasonably abandoned because the cost of recovering and forwarding the goods to Calcutta would exceed their value on arrival. The Division Bench's reliance on Middows v. Robertson was misplaced as it was reversed by the House of Lords in Rickards v. Forestal Land Timber and Railways Co., Ltd. The Supreme Court emphasized that the policy covered non-delivery for any reason, including the cost of transportation exceeding the value of the goods.

4. Applicability of Exclusion Clauses:
The Division Bench held that the exclusion clauses applied due to the unseaworthiness of the vessel. The Supreme Court, however, noted that the exclusionary clauses were not specifically pleaded or proved by the respondent. The burden of proof was on the respondent, which was not discharged. The Supreme Court concluded that the unseaworthiness of the vessel, leading to it being stranded and the subsequent non-delivery of goods, fell within the "peril insured against" as per the policy terms.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgment of the Division Bench and restoring the judgment and order of the learned Single Judge. The appellant was entitled to the balance amount after giving credit for the amount received from the sale of the goods. The Supreme Court also awarded costs to the appellant, with counsel's fees assessed at Rs. 10,000/-.

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