TARMOHAMED JANOO & COMPANY Versus CENTRAL INSURANCE COMPANY LTD.

1. The plaintiff is a partnership firm, who had, at the relevant time insured his goods stored in his godown situated on Plot No. S‑GK/8 Kharadar, Karachi, with defendant No. 1, who is insurance company. The plaintiff had been taking insurance policy from the defendant No. 1, in respect of his goods in the said godown, since 1966. In the said plot outside the pucca godown, there is shed with asbestos sheets and open compound, in which various goods including some hazardous goods were kept by the plaintiffs, but they were not insured. On 7th July, 1973 at about 10 or 11 p.m. a fire broke out in the shed outside the insured godown. The fire‑brigade was informed, who extinguished the fire at about 4‑00 a.m. However, on 8‑7‑1973, sometime after day break, fire again broke out in the shed outside godwn, which affected godown and goods therein were also burnt and totally damaged. The insured goods of the plaintiff consisted of 1135 chests of tea valued at Rs.7,28,410.34 and 237 bags of turmeric valued at Rs.62,772.15. The plaintiff filed such claim with defendant No. 1, who deputed the defendants Nos. 2 and 3, who are the surveyors, to assess the loss. In their report, the defendants Nos. 2 and 3, held the defendant No. 1 not to be liable to pay the loss as in violation of the terms of the insurance policy, the plaintiff had kept hazardous goods in the godown. On the refusal of the defendant No. 1 to pay loss to the plaintiff he filed this suit for decree in the sum of Rs.8,34,621.68 with interest @ 12$ per annum from the date of suit till its realization. He sought the decree against all the defendants jointly and severally.

2. In the written‑statement defendant No. 1 admits to have insured the goods in the godown of the plaintiff with the condition that hazardous goods will not be kept in the godown. The loss by fire is not denied, but it is contended, that as the plaintiff had kept hazardous goods in the godown, the defendants are not liable to pay any loss to the plaintiff. The defendants Nos. 2 and 3 contend, that survey report submitted by them was correct and, that no cause of action has arisen against them. They claim compensatory costs. The following consent issues were settled by the Court:‑

(1) Whether the plaintiff firm is registered under the Partnership Act, 1932?

(2) Whether since 1966 in course of business the plaintiff has been storing non‑hazardous goods in the godown in question situated on a plot at 5‑GK/8, Kharadar, Karachi?

(3) Whether at any relevant time the stocks of hazardous goods were stored or lying in the insured godown?

(4) Is it practice amongst insurance companies to inspect godown insured and/or to be insured?

(5) Did the defendant's representative inspect the insured premises as alleged in para.

(6) Whether since 1966 the plaintiff insured with the defendant No. 1 its stocks stored in the godown in question against any loss or damage by fire?

(7) Whether shed and the open space in question did or did not form part of the insured godown?

(8) Whether the goods comprising of 1135 chests of tea valued at Rs.7,28,410.34 and 237 bags of turmeric valued at Rs.62,772.15 were totally burnt or damaged?

(9) Whether the plaintiff's loss in question is covered under the contract of insurance?

(10) Whether the defendants Nos. 2 and 3 wilfully and/or recklessly proceeded on the false assumption that the said shed and the open space formed part of the insured godown? If so, to what effect?

(11) Whether the defendants Nos. 2 and 3 acted in breach of their obligations to survey and assess the loss in question as impartial surveyors?

(12) Whether at all relevant times the location of the insured godown was within the knowledge of the defendant No. 1?

(13) Whether alleged erronous description, if any, of the insured godown is material and disentitles the plaintiff to claim loss in question?

(14) Was there any mis-description of the insured godown?

(15) Whether the fire was caused by flood? If so, to what effect?

(16) Whether the warranty/ condition, if any, in the said contract of insurance required the plaitniff not to store hazardous goods in the said shed? If so, was it waived by the defendant No. 1?

(17) Whether the defendants Nos. 2 and, 3 were/are liable to rectify and correct the survey report? If so, to what extent?

(18) Is the defendant No. 1 precluded from repudiating its liability on the alleged grounds on the principles of estoppel, waiver and acquiscence.

(19) What amount, if any, is due and payable to the plaintiff and by whom?

3. (19A) Whether the suit against defendants Nos. 2 and 3 is not maintainable and whether the said defendants are entitled to compensatory costs?

(20) What should the decree be?

4. P.W. Tar Janoo, Exh. 5, has been examined by the plaintiff. He is partner of the plaintiff No. 1. He has related the facts as disclosed in the above prosecution story, and has produced various documents which are Exhs. 5/1 to 5/74. Defendant No. 1 has examined one Muhammad Sullaiman, their employee as claim officer as Exh.

6. The defendant No. 2 has examined his employee, Usman, as Exh.

7. He has produced survey report as Exh. 7/1.

5. Certain facts are admitted which may be narrated as under:‑‑

6. The non‑hazardous goods of the plaintiff in his godown on the plot mentioned above were insured with defendant No. 1 at the relevant time. On this plot there is a constructed room/hall, shed/sheds with asbestos sheets outside this constructed room and also some open space. Goods of the plaintiffs were also stored in the shed and the open space. Admittedly, certain hazardous goods were stored in the shed adjoining the constructed room. Admittedly, these hazardous goods caught fire due to rain water gushing in the shed, which spread to the insured goods. It is conceded by Mr. Mamnoon Hassan, learned counsel for the plaintiff that if it is held, that hazardous goods were kept in the godown, where insured goods were to be kept, then plaintiff is out of Court. The real dispute between the parties appears to be as to whether the godown in which the insured goods of the plaintiff were to be kept comprised only of the constructed room or comprised of the entire plot and included shed and open space also. The relevant insurance policy has been produced as Exh. 5/21. There is schedule to this policy, which describes the godown and property insured and the sum in which it was insured. It shows the property was insured for Rs.10,00,000 at 75$ of its value. This schedule reads as under:‑‑

7. "On stock of cotton yarn, cotton piece goods, tea, turmeric, betelnuts, ground nuts, empty gunny bags, in bundles and such other general merchandise of non‑hazardous nature only, the property of the insured is held by them in trust, in deposit, on commission and or in joint account with others for which the insured may be legally responsible in the event of any loss or damage by fire, whilst stored and/or lying in a godown bearing No. 5‑GK/8, situated at Kharadar Street, Karachi.

8. 75% of Rs.1,25 + 0.50$ Rs.10,00,000

9. The building of the said godown is of 1st class construction and used for the storage of non‑hazardous goods only.

10. Subject to Warrantly 'B' of Form 'A' attached. Issued on declaration basis as per declaration and clause attached.

11. Subject to warranties Nos. 1 to 4 as per printed form attached.

12. Renewal of fire policy No.F/G‑7575/72."

13. It will be pertinent to reproduce the relevant part of evidence of P.W. Tar Muhammad as under:‑‑

14. 'I have godown for storing our merchandise. It is situated in Borhi Road, Kharadar, and its number is GK‑8/5. This godown consists of three parts. There is a pucca building. First part consists of main godown. The other portion is covered by asbestos sheets, and the third portion is open courtyard'."

15. It is contended by the plaintiff, that only that portion of godown, which is described as main godown was meant for keeping insured goods. It is pointed, that in the schedule, reference is made to the godown as first class construction. It is contended, that this description in the schedule is only applicable to the main godown and that was the only portion, which is described as godown in the insurance policy. It is admitted fact, that before the insurance policy was taken, the officers of defendant No. 1 had visited and inspected the godown. D.W. Muhammad Sullaiman the claim officer of the defendant No. 1 has stated "the plaintiff's firm had obtained a fire insurance policy from us in respect of cotton yarn pieces of goods, turnmic, grain, buts etc. stored in the godown situated on plot No. GK/8, Kharadar Street, Karachi. The plaintiff had not disclosed to us at the time of insurance, that they would be storing hazardous goods in the adjoining portion of this godown." It is contended by Mr. Mamnoon Hassan, that the hazardous goods were admittedly kept in the shed adjoining godown and even from the statement of the defendant's witness, it is clear, that the hazardous goods were not kept in the godown, but they were kept in the adjoining portion of the godown. He argues, that all these facts leave no doubt, that the defendant No. 1 knew, that the godown in which insured goods were to be kept was main godown and the godown described in the insurance policy did not include the shed with asbestos sheets and open compound. In the cross‑examination, this witness has further admitted, that they had insured only the non‑hazardous goods kept in the main godown of the plaintiff.

16. The plaintiff has produced 17 insurance policies as Exhs. 5/5 to 5/21. They are from 1966 to 1973. All these insurance policies are for fire insurance and show, that various goods of the plaintiff were insured with the defendant No. 1 in the godown in question. In all the policies same number of godown is shown and it is described to be a first class construction and used for non‑hazardous goods only. It is admitted by D.W., Muhammad Sullaiman that before issuance of insurance policies, their agent, visit the site. It is not possible to believe, that in the instant case the agents of the defendant No. 1 would not have visited the site nor it is so asserted by the witness of defendant, who only states, that he did not remember if his agents had visited the godown before the goods in question were insured. I have already pointed the goods of plaintiff, in the godown in question, were being insured with the defendant No. 1 since 1966 and it cannot be said that he was ignorant of the actual position and location of the godown.

17. Since 1966, in all the policies the construction of godown is shown to be first class, and there is nothing on record to show, that at any time the defendant No. 1 had raised by objection that the construction was not first class. Under the circumstances, the objection raised by the surveyor in the survey report, that the construction was not first class, or that the location of the godown has not been properly disclosed in the insurance policies, does not bear any weight. Keeping all the circumstances, and evidence of the witnesses of the parties, as pointed above, there appears to be no doubt, that the godown referred to in the policy is the main godown viz. pucca constructed room/hall and does not include the open space and the shed with asbestos sheets.

18. It is not disputed, that hazardous goods were not kept in the main godown, which is hereinafter referred to as godown, nor is there any evidence to show, that at any time hazardous goods were kept in this godown. It is not disputed, that hazardous goods were kept in the shed covered by asbestos sheets, which is adjacent to the godown. It is also not claimed by the plaintiff, that at any time, they informed the defendant No. 1, that they are keeping hazardous goods in shed adjacent to the godown. Now question that requires consideration is, whether by keeping hazardous goods outside, but adjacent to the godown, and by not informing the defendant No. 1 about the location of the hazardous goods, the plaintiffs have disentitled themselves from claiming damages under the policy.

19. Admittedly, there is no clause in the policy requiring the plaintiffs not to keep hazardous goods in the shed adjoining the godown or to inform the defendant No. 1 in case he kept any hazardous goods outside the godown. As such under the policy, the plaintiffs were not barred from keeping hazardous goods outside the main godown nor were they required to disclose such fact to the defendant No. 1. It may be pointed, that in the usual course of business the agents of the defendant No. 1 would be presumed to have visited the godown of the plaintiff 17 times before issuing the 17 policies. The defendant No. 1 would be presumed to have knowledge that apart from the main godown, the shed and open compound were also used by the plaintiff for storing his uninsured goods but in spite of this knowledge the fact that no such condition was inserted in the policy to shows the implied consent of the defendant No. 1, that the plaintiff could keep any goods including the hazardous goods in the shed and open compound. He, therefore, cannot avoid the claim on that ground.

20. In view of this long standing business relationship between these parties with respect to the godown, it cannot be said, that there was any misdescription or concealment by the plaintiff with regard to type of construction or location of the godown.

21. Keeping in view the facts discussed above, Issues Nos. 2, 4, 5, 6 and 12 are answered in affirmative, while issues Nos. 3, 13, 14 and 16 are answered in negative. Issue No. 1 is not pressed by the defendants. On issue No. 7 my finding for reasons recorded above, is that shed and open space did not form part of insured godown.

22. The defendant No. 1 is resisting the suit mainly on two grounds. Firstly, it is contended, that hazardous materials were kept in the godown in violation of the conditions of insurance policy and this fact was concealed by the plaintiff from the defendant and secondly, that fire was not proximate cause of the loss.

23. In support of the first ground, the learned counsel for the defendant No. 1 has relied upon the case of Brownlie v. Campbell and others (1880) 5 A C 925 at page 954. It is observed as under:‑‑

24. "In policies of insurance, whether marine insurance or life insurance, there is an understanding, that the contract is uberrima fides, that if you know only circumstance at all that time may influence the underwriter's opinion as to the risk he is incurring, and consequently as to whether he will take it, or what premium he will charge if he does take it, you will state what you know. There is an obligation there to disclose what you know, and the concealment of a material circumstance known to you, whether yon thought it ‑material or not, avoids the policy."

25. In that case, however, it was held, that there was no false representation and claim of the plaintiff was allowed.

26. Reliance is also placed on the case of Dalglish v. Jarvie reported in English Reports Vol. 42 page 89. In that case ex parte injunction granted by the Court was dissolved, on the ground, that material facts were not brought by the plaintiff to the notice of the Court. In the case of A.F. Watkinson & Co. Ltd. v. Hullett reported in (1938) 61 Lloyd's List Law Reports 145, the action was disallowed as the insured had not disclosed, that the risk under written was stock of waste paper.

27. All these cases are distinguishable from the instant case, as in the instant case there is no misrepresentation or concealment of any fact. As pointed above the hazardous good's were not kept in the godown and there was no condition, that they would not be kept in the shed or open compound adjacent to the godown and as such it was not necessary for the plaintiff to have disclosed this fact to the defendant.

28. In support of the second contention it is argued, by the learned counsel for the defendant No. 1, that it was due to flood water, that the hazardous materials kept in the shed caught fire and, therefore, the proximate cause of the damage would not be fire but flood and the loss caused by the flood was not covered by the policy.

29. Reliance is placed on the case of Play and Shipping Company v. Norwich Union Fire Insurance Society, reported in 1918 A C 350. In that case plaintiff had insured their vessel with the defendant against ordinary marine perils. The policy contained a warrantee free clause which exempted the insurer from loss caused by all consequences of hostilities or warlike operation whether before or after declaration of war. The vessel was torpedoed but had managed to reach the harbour where it subsequently grounded and was damaged due to fall in tide and subsequent tides. It was held, that torpedoing was the proximate cause of loss and, therefore, plaintiff could not recover under the policy.

30. In the case of Wyne Tank and Pump Co. Ltd., v. Employers Liability Assurance Corporation Ltd. (1974) IQB 57, Lord Denning J. observed, that "it was settled in the insurance law, that the cause of a loss is that which is the effective or dominant cause of the occurrence or as it is some times put, that which is in substance the cause even though it is more remote in point of time, such cause is to be determined by common sense." In the case of Hooley Hill Rubber and Chemical Co. v. Royal Insurance Co. and others principle enunciated in the case of Leyland Shipping Co, was approved and followed.

31. In this context it will be helpful to refer to Halsbury's Laws of England Fourth Edition (Vol. 25). In para 617 it is stated "a policy of insurance is intended to protect the assured against loss caused by fire. If a fire results the policy is plainly applicable unless an exception became operative." Para 618 provides, that there is no fire within the meaning of a fire insurance policy unless there is ignition, either of the property insured or of the premises, where it is situated. Under para 619 the cause of fire is normally considered immaterial, unless, it arose from an exceptional peril, or was lit by the assured for the purpose of destroying property insured. Para 621 provides, that where a fire, which causes a loss, is itself caused by a peril expressly excluded by an exception clause in the policy, the assured cannot recover. Para 629 requires the loss should be caused by fire. Under para 630 losses which are not proximately, but only remotely caused by fire are not covered by an ordinary fire policy. Para 631 describes proximate cause as bass of exception. It is stated therein as under:‑‑

32. "The doctrine of proximate cause is applied for the purpose of determining whether a loss is caused by an excepted peril. If property is not burned at all, but is destroyed by the direct operation of an excepted peril as for instance, by the concussion of an explosion, the explosion is the proximate cause of the loss and it is immaterial that the explosion was itself caused by fire. If the subject‑matter is burned, but the fire which burned it derived its origin from an excepted peril, the liability of the insurers depends upon whether the excepted peril is to be regarded as proximate cause of the loss or not. Where the fire is the natural consequence, of the excepted peril the excepted peril is the proximate cause of the loss.

33. On the other hand, where the fire is not the natural but merely an accidental consequence of the excepted peril the proximate cause of the loss is the fire, the excepted peril being the remote cause only, and the loss is, therefore, covered by the policy."

34. It is an admitted fact, that rains water had entered the open space and the shed outside the godown and as a result of which the hazardous materials kept outside the godown, caught fire which subsequently, spread inside the godown and destroyed the insured goods. Now question arises as to whether the proximate cause of the loss was rain‑water, flood or fire. According to the survey report "the proximate cause of the casualty appears to be flood, which is not covered under the policy of insurance. Although, we have endeavoured to segregate the damages by flood and fire on the basis of physical nature of damage, however, since the fire is understood to have been caused in the drums of sodium hydro sulphite due to contact with flood water, the cause of the entire loss may be taken as flood".

35. The learned counsel for the plaintiff has referred to certain passage from "Fire and Motor Insurance" by E.R. Hardy Ivamy, Third Edition. At page 12, para 5 it is observed as under:‑

36. "Where the loss is the necessary consequence of the fire, or in other words, where apart from the fire, the loss could not have happend, the fire, for the purposes of the policy is the cause of the loss."

37. Fire cannot be ignited by itself but there is always some other factor which ingnites the fire. If that other factor, which causes the fire, is considered to be proximate cause of loss, that may be caused by such fire, then the policy of the insurance would become redundant. No assured person in such case can claim under the fire insurance policy. The dominant cause in the loss which is actually caused by the burning of goods by fire, would always be fire. The insurer can escape liability of such loss, only in two cases.' Firstly, if the fire is caused by excepted peril and secondly, when assured himself causes the fire to destroy the insured goods. It is not alleged that the plaintiff himself caused the fire with such intention. No doubt, damage by flood is not covered under the policy, but there is no clause in the policy that the loss as a result of fire caused by flood water is excepted. In the instant case, the alleged loss could not have been caused only by the rain water if the fire had not been ignited thereby. The fact remains, that the fire was ignited because of the contact of rain water with the hazardous materials. However, no evidence has been produced to show, that fire was natural cause of such contact of the rain water with hazardous materials. In absence of such evidence, it is to be presumed that fire was accidently ignited due to contact of the rain water with hazardous materials. Under the policy the insurer would have been excepted from the loss, if the hazardous materials were kept inside the godown. It has already been held, that the hazardous material was kept outside the godown, which was not prohibited by the policy. The defendant No.l is, therefore, liable for the loss under the policy. My findings on Issues Nos.9 and 8 are, therefore, in affirmative.

38. Now, I proceed to consider the issue Nos.8 and 19. Even according to the survey report Exhs. Nos.7/1, 1135 chests of tea were destroyed. The report of surveyor assessed the value of these chests to be Rs.6,98,334.21. This value was assessed on the ground, that value of tea has fallen quite considerably in view of imports. However, there is not evidence to show, that the value of the tea had fallen. As such the value, assessed by the plaintiff, on the basis of invoices to be Rs.7,28,410.3f, has to be accepted. The survey report shows, that there were 433 bags of turmeric lying in the godown and entire quantity was damaged. However, the plaintiff has claimed the damage for 237 bags and he has valued it at Rs.62,772.15, whereas, according to the survey report, the value of the total stock, which was destroyed was Rs.1,06,437.25. Under the circumstances, the value of the loss for the turmeric fixed by the plaintiff does not appear to be unreasonable. The survey report shows, that the loss was caused by the flood and fire but it is not clear from the report, as to how much loss was caused by fire and how much by flood. The evidence on record shows that the entire goods were burnt. There is no evidence to the contrary produced by the defendants. Therefore, my finding on issue No,8 is in affirmative and issue No. 19 is that suit amount is due and payable to the plaintiff by defendant No.1

39. Issue Nos.10, 11 relate to the conduct of the defendants Nos. 2 and 3 . The assessment of surveyors / defendant Nos.2 and 3 with regard to the facts, viz. damage amd cause of damage is not dispute. The only portion of their reportwhich is dispute by the plaintiff ,is about the alleged deception caused by the misdescription of the construction and location of the godown and their option that the hazardous goods were kept inside the godown which according to the survey report comprise of not only main godown , but also shed and open space . I have already discussed and held that there was no misdescription which caused deception with regard to the location and type of construction of the godown and also that the godown referred to in the insurance policy was main godown and it did not include in the shed and open space. The defendants Nos. 2 and 3 were merely agents of the defendant No.1 entrusted with the functions of survey and report. In such event they cannot be penalized for their opinion which may even be erroneous. There is no evidence to show that they acted with malice though their above conclusions were wrong. As such my finding on issues Nos.10 and 11 is in negative and consequently it is affirmative on Issue No.19-A. the opinion of the defendants Nos. 2 and 3 as to the liability of defendant No.1 is not accepted by the court therefore they are not entitled to any compensatory cost.

40. In view of this judgment by which the suit of plaintiff is being decreed, it is not necessary for defendants Nos2 and 3 to rectify their report, my finding on issue No.17 is accordingly in negative. In view of the above discussions and findings the suit of the plaintiff for Rs 8.34,621,68 is decreed with costs against defendant No.1. he is also directed to pay 10% interest on the decretal amount from the date of suit till the realization of the decretal amount the suit of the plaintiff against defendants Nos.2 and 3 is dismissed with no orders as to costs.

41. The judgment was announced by a short order dated 15-9-1987. The above are the reasons in support of the said short order.

42. A.A./T-22/K Suit decreed.