The Supreme Court has dismissed an appeal filed by People’s Leasing and Finance PLC against Amana Takaful PLC over a US$700,000 insurance claim relating to a vessel that sank in 2009.
A three-judge bench comprising Justices Mahinda Samayawardhena, Dr Sobhitha Rajakaruna and Sampath K.B. Wijeratne upheld the Commercial High Court’s earlier decision to reject the claim.
The dispute arose after the Maldivian-flagged vessel M.V. Medhufaru sank on May 31, 2009.
People’s Leasing, which retained legal ownership of the vessel under a lease agreement with Sawahil Lines (Pvt) Ltd, had obtained a Hull Takaful insurance policy from Amana Takaful.
Following the sinking, People’s Leasing sought US$700,000 in compensation, arguing that the vessel had encountered severe monsoon weather while travelling from India to the Maldives.
However, Amana Takaful rejected the claim, maintaining that the vessel was unseaworthy and that the required classification certification had not been maintained.
The Supreme Court found that the vessel, which was approximately 33 years old, had suffered from corrosion, holes in its hull and continuous water leakage before sinking.
The Court observed that adverse weather alone could not establish the insurer’s liability when evidence indicated that the vessel’s physical condition had materially contributed to the sinking.
A key issue was the vessel’s classification under the Indian Register of Shipping (IRS).
The Court found that the vessel’s IRS classification certificate had expired in September 2008, several months before the sinking, and had not been renewed.
The judges ruled that maintaining the agreed classification was an express condition of the insurance policy and that its breach provided an independent basis for rejecting the claim.
The Court also rejected People’s Leasing’s argument that the Islamic Takaful nature of the insurance arrangement prevented Amana Takaful from relying on the policy’s contractual conditions.
Justice Dr Sobhitha Rajakaruna, delivering the judgment, held that the principles governing Takaful insurance did not override the express contractual obligations agreed upon by the parties.
The judgment also examined a dispute over unpaid insurance premiums, noting that the outstanding balance had been settled after the vessel sank. However, the Court found it unnecessary to determine that issue separately because the breaches relating to seaworthiness and classification were sufficient to uphold the dismissal.
Accordingly, the Supreme Court dismissed the appeal and affirmed the Commercial High Court’s October 2018 judgment, without awarding costs in the Supreme Court proceedings. (Newswire)