The Ethio Life and General Insurance blast the cassation bench over its final verdict as complaints from insurers and reinsurers alike flood in, with the ruling being said to have a detrimental effect on the sector.
The court case that was filed for the Federal High Court but inthe process got a final verdict at the Cassation Bench of the Federal Supreme Court made the insurance company,the defendant, pay about 115 million birrtothe plaintiff, Walia Steel Industry, which filed its case for the compensation of insurance coverage for its cargo consignment coming from Egypt.
According to the case, the steel company had received marine insurance coverage for its 4, 953 metric tons of hot rolled steel shipment whichat the time had acostof over 74 million birr.
However, the vessel, MV Fortune Express, which loaded the cargo, disappeared, despite being expected to arrive at the port in Djibouti early in May 2017.
During this period, the insurers and its client got the information that the vessel diverted its voyage and docked at a port in Pakistan with the crew members on the vessel trying to sell the cargo.
When they got the information about the cargo, Ethiopian companies took legal action and the Pakistani legal body froze the cargo before it was out for sale.
However, the case in Ethiopia was not halted since the steel factory demanded compensation for the commodity which was not transported to its facility as per the timeframe.
Walia filed its case to the Federal High Court for the insurance company to settle its compensation as per the agreement they got.
On the other side the defendant, Ethio Life and General Insurance, argued that the marine insurance policy that it gives included the perils of the sea coverage and that there are also conditions that the client ought to fulfill like ‘institute classification clauses’, which include; theyear of build of the vesselwhich should be a liner ship with not more than 25 years, and classification of societies that it did not fulfil.
It added that the claim of the company was not aligned with the insurance policy and the maritime code of the countryand explained that the ‘perils incidental to the perils of the sea’were not included.
The Ethiopian maritime code, which is mainly adopted from the 1906 act of Britain, article 303 stated that damage to, and loss of, the things insured resulting from storm, shipwreck, stranding, collision, jettison, fire, explosion and in general arising out of all perils of the sea and force majeure, are at the risk of the underwriter.
Meanwhile, the British act included insurance coverage for manmade losses; the Ethiopian code however omits that.
The defendant also added that the cargo was not lost, rather it was frozen by the Pakistani court, and that it should not compensate the customer as if the insured cargo was lost or damaged.
However, the Higher Court gave a verdict in favor of the plaintiff and ordered the insurance company to settle the compensation. But the insurer filed its plea to the Federal Supreme Court, whichwas convinced by the insurance company’s argument and averted the lower court decision.
Following this, Walia claimed its case to the Cassation Bench of Federal Supreme Court and the final judicial body returned the case and accepted the verdict of the higher court.
According to the information Capital obtained from senior leadership of Ethio Life and General Insurance, who briefed the case for media late this week, the decision given by theCassation Bench was a surprise and they considered the case as dangerous for the country in general and the insurance business, which is directly working with global partners, in particular.
“We have provided the case to the Ethiopian Insurers’ Association to review the process and to be informed about the new trend in the business,” Shimeles Gedlegiorgis, President of Ethio Life and General Insurance, said.
He said that the legal experts of the 18 insurance companies that are members of the association have reviewed the whole legal process and provided their detailed analysis ofthe final verdict.
“We don’t consider the case to be our issue alone but it is for the sector in general. It shall affect the relationship between Ethiopian insurance companies and global partners like reinsurers,” the President said.
The detailed review and comment of the legal experts of insurance companies that gather through their association were sent to the National Bank of Ethiopia, the financial sector regulatory body, and the President of the Federal Supreme Court.
In Capital’s review of the document copy, the association criticized the verdict of the Cassation Bench that gives the final decision as per the country law. It ridiculed the courtforpreferring to refer to the British act which Ethiopia accepts but with the exclusion of some of the clauses.
For instance,the association referenced that the maritime code article 303 does not have similarities with the British act but the Cassation Bench preferred to use those clauses on the act. It has also argued that the court did not properly define the insurance policy that the two parties signed.