ABC Ltd. is a Public Limited Company, engaged in the business of exports of rice. It uses godowns of the Port Authorities for storage of the rice stocks meant for exports. The company has taken a Fire Insurance Policy co

ABC Ltd. is a Public Limited Company, engaged in the business of exports of rice. It uses godowns of the Port Authorities for storage of the rice stocks meant for exports. The company has taken a Fire Insurance Policy cover from XYZ Insurance Ltd. which is a Public Sector Company. Satish who is a Development Officer with the Insurance Company has been assigned the account of ABC Ltd. to service and cater to all its requirements of service. The policy is effective from July of one year to June of the subsequent year. On 21st and 22nd July, 2015, there were heavy rains with cyclonic storms, due to which the Port Authority's Godowns were severely flooded. On ceasing of the rains on 26th July, 2015, ABC Co. Ltd. found that most of the bags stored in the Port's Godowns had been washed away. Except for some clusters of rice here and there, all the stocks had been damaged and destroyed by the rain. The Company lodged a claim with the Insurance Company, asking for compensation under the Fire Insurance Policy. The Insurance Company while examining the claim, observed that : The policy was due for renewal on 1st July, 2015 and the Insurance Co. had already sent a notice for payment of renewal premium to ABC Limited. ABC Ltd. had handed over a cheque for the premium as per the premium notice received from XYZ Insurance Ltd. The cheque was given to Satish, Development Officer on 27th June, 2015. The receipt of the cheque was duly acknowledged by Satish who had also issued a Cover Note for the period from 1st July, 2015 to 30th June, 2016. Satish however went on an official trip and deposited the cheque with his company branch on 16th July, 2015 after returning from his official trip. The accounts department deposited the cheque with the bank of the Insurance Company on 21st July, 2015 which was credited to the XYZ Ltd. account on 25th July, 2015. The Insurance Company however did not issue the regular policy till the event of the loss. ABC Ltd. was insured with XYZ Insurance Ltd. since the inception of its business 12 years back and no claims had been made so far by the Company. On receipt of claim from ABC Ltd. the Insurance Company analysed the claim papers and sent a reply to ABC Ltd. repudiating the claim on the following grounds that: ABC Ltd. Co. was not covered on the date of loss, as no premium was paid for the cover. The premium was received by XYZ Insurance Co.'s accounts department on 25th July, 2015 after the loss had occurred and hence no insurance policy can be granted. Loss due to floods is not covered under Fire Insurance Policy. XYZ Insurance Co. was not bound by the Cover Note issued by Satish, Development Officer. ABC Ltd. Co., on receipt of reply from XYZ Insurance Ltd. has approached you as an Insurance Expert to advice them for resolution of the dispute. They have also appraised you with the following additional facts about the case: Goods stored in the Godowns included 22000 tons of Rice acquired at a cost of ₹200 crores. The quantum of stocks was supported by the stock registers of the Port Authorities, which is also a Third Party record for confirmation. The stocks in the godown were covered by a Fire Insurance Policy of ₹250 crores. The stocks were pledged to a Nationalized bank for a loan of ₹75 crores. The outstanding amount on the date of fire was ₹60 crores. The Bank has also sent a claim to the Insurance Co. to pay the claim amount directly to the bank as the name of the bank was also endorsed on the earlier policies. The District Collector of the area appointed by the State Government, as Relief Commissioner had also certified that the goods in the godown were lost in the floods and there was no salvage. Based on the above facts of the case, as an Insurance Expert, kindly advice ABC Ltd. Co. on the following issues: Tenability of the claim of Banker and ABC Ltd. for flood loss under Fire Policy.