Interpretation Of Unreasonable Insurance Clauses In Maritime Cases

Posted On - 24 April, 2025 • By - King Stubb & Kasiva

Summary:

[1]The Supreme Court ruled in favour of Sohom Shipping in a dispute over an insurance claim rejected by New India Assurance. The insurance required the voyage to “commence & complete before monsoon sets in.” Sohom’s ship sailed on June 6, 2013, but faced monsoon-related damage. The insurer denied the claim, arguing breach of the monsoon clause. The Court found the clause impractical, as the policy period (May 16–June 15) overlapped with monsoon dates (June 1 for west coast, May 1 for east coast). Since compliance was impossible, the clause was deemed non-material and waived. The case was sent back to the consumer commission to determine the payable amount. The insurer’s rejection was invalidated.

Facts:

  1. Sohom Shipping Pvt. Ltd. (a shipping company) filed an appeal against New India Assurance Co. Ltd. (an insurance company) after their insurance claim for a damaged barge was rejected.
  2. The insurance contract stated the barge’s voyage must “commence and complete before monsoon sets in.” The insurance company denied the claim, arguing the voyage began after the monsoon started (June 1 on the west coast).
  3. Sohom’s newly built barge, Srijoy II, was set to sail from Mumbai to Kolkata. The voyage started on June 6, 2013, but the barge faced engine failure and bad weather, leading it to run aground near Ratnagiri.
  4. The insurance period was between May 16 to June 15, 2013.As per official guidelines, monsoon begins on June 1 on the west coast (where Mumbai is located). Sohom argued the voyage was impossible to complete before June 1 due to the travel route spanning both coasts.
  5. The National Consumer Commission (NCDRC) dismissed Sohom’s complaint, citing lack of good faith.

Issue:

  1. Whether the insurer could reject the claim solely based on the monsoon clause, despite the voyage period inevitably overlapping with monsoon?
  2. Whether the Appellant violated the principle of uberrima fides (utmost good faith) by allegedly suppressing material facts?

Judgment:

  1. Monsoon Clause Interpretation:
    1. The insurance contract required the voyage to “commence & complete before monsoon sets in.”
    1. As per the DGS Circular, the monsoon starts on June 1st (West Coast) and May 1st (East Coast).
    1. The voyage from Mumbai (West) to Kolkata (East) meant crossing both coasts. Even if the ship started on May 16, it would reach Kolkata after June 1st (monsoon start on East Coast).
  2. Clause Was Impossible to Fulfill:
    1. The insurance period (May 16–June 15) overlapped with monsoon dates.
    1. Strict compliance would make the insurance meaningless, as the voyage couldn’t realistically avoid monsoon conditions. The Court called this an “absurdity”.
  3. No Ambiguity, But Implied Waiver:
    1. The Court ruled the clause was not ambiguous (monsoon dates were clear). However, the Respondent knew the voyage route and policy period.
    1. By issuing the policy, the Respondent impliedly waived the monsoon clause, as enforcing it would defeat the insurance’s purpose.
  4. Contra Proferentem Rule Not Applied:
    1. The Appellant argued the clause should be interpreted against the insurer (due to ambiguity). The Court rejected this, stating the clause was clear but impractical.

Analysis:

The Supreme Court ruled in favour of Sohom Shipping, overturning the insurance claim rejection. The key issue was a contract clause requiring the voyage to “commence & complete before monsoon sets in.” The court found the clause impractical, as the voyage from Mumbai to Kolkata (May 16–June 15, 2013) inevitably overlapped with the monsoon (starting June 1). The insurer knew the timeline covered monsoon risks, making the clause non-material. Ambiguities in the contract were interpreted against the insurer (contra proferentem). The court held the clause could not be enforced as it created an impossible condition, rendering insurance coverage meaningless. The case was sent back to NCDRC to determine the claim amount, ensuring fair compensation for Sohom.

[1] BEFORE THE HON’BLE SUPREME COURT OF INDIA

            SOHOM SHIPPING PVT. LTD. VERSUS M/S. THE NEW INDIA ASSURANCE CO. LTD. & ANR.

     CIVIL APPEAL NO. 2323 of 2021

  Judgment Dated: 7th April 2025

https://api.sci.gov.in/supremecourt/2021/14335/14335_2021_7_1501_60780_Judgement_07-Apr-2025.pdf