District Court holds SLIC liable as reinsurer; Janashakthi gets relief

Colombo District Court last week held that Sri Lanka Insurance Corporation (SLIC) was liable as a reinsurer to Janashakthi Insurance Co. Plc., in a case filed by the latter.

District Court Judge W.R.R.N. Wathupola in his judgment determined that the Defendant SLIC cannot evade or free itself from the liabilities as a reinsurer to the Plaintiff Janashakthi Insurance Co.

He ruled that the Plaintiff Janashakthi Insurance Co is entitled to the reliefs prayed for in its Plaint against the SLIC.

Nigel Hatch PC with R. Jayasinghe, K. Deekiyanage and P. Abeywickrema appeared for the Plaintiff. S.L. Gunasekera with K.D. Alwis appeared for the Defendant SLIC.

The Plaintiff Janashakthi Insurance Plc filed initiated a suit against the SLIC to obtain declarations that the insurance covered by the Contract of Insurance was reinsured by the Plaintiff with the Defendant SLIC; it contended that the Defendant is liable for all liabilities arising from the reinsurance.

It maintained the Defendant SLIC is the reinsurer of the said Contract of Insurance but the Defendant in its Answer denied the averments stated in the Answer and prayed for a dismissal of the action.

The Plaintiff issued a Contract of Marine Insurance to P.B. Umbichy and upon damages caused to the property covered by the said Contract of Insurance, the insured had made a claim to the Plaintiff Company.

A High Court action was filed regarding this issue, which was eventually determined by the Supreme Court in favour of P.B. Umbichy.

There is no written contract of reinsurance between the Plaintiff and Defendant. However, the Plaintiff’s position is that the Defendant Company is the reinsurer for this Contract of Insurance in terms of Section 6(c) of the Sri Lanka Insurance Corporation Act (SLIC Act) No.2 of 1961. This section clearly provides for the Defendant to act as a reinsurer.

However the Defendant’s position was that the reinsurance was made with another reinsurance company through the Defendant; the Defendant only acted as the facilitator in the said Contract of Reinsurance and that as such the Defendant is not a reinsurer but a reinsured of the said other reinsurance company.

This Contract of Insurance is a marine insurance policy. The Plaintiff Company is the successor of the National Insurance Company Ltd.

The Court held there is no dispute that a written contract of reinsurance does not exist in this case. Thus the Court has to take into consideration Section 6 (c) of SLIC Act and other documents exchanged between the parties in determining whether the Defendant Company has acted as a reinsurer.

Court noted that the Defendant Company does not deny that it was considerably involved in facilitating reinsurance to the Plaintiff. The Defendant’s position is that it was only the facilitator and the Defendant had a contract of reinsurance with another private reinsurance Company. However, the Plaintiff had no involvement, exchange or contract with the said private reinsurance company.

Court observed the SLIC Act does not provide for the Defendant to act as a broker in contracts of insurance of this nature. According to the evidence before Court, the one and only company directly involved with the Plaintiff regarding a contract of reinsurance has been the Defendant.

The Defendant did not need to be involved in this contract of reinsurance had the Defendant not been the reinsurer. The Court observes that the Defendant would not have been involved in this contract in manner whatsoever if not for Section 6 (c).

The Court noted that is manifest from the evidence that the Defendant had control over the said reinsurance. However, the Defendant has not done anything to deny that the Defendant is the reinsurer when the Plaintiff asked for certain information and when the Letter of Demand was received.

As such, taking the nature of all dealings between the parties into consideration, the Court clearly determined that the Defendant has acted as the reinsurer. Therefore the Court determined that the Defendant cannot evade or free itself from the liabilities as a reinsurer. As such the Court determined that the Plaintiff is entitled to the reliefs prayed for in the Plaint.