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Essar Oil’s insurance claim of Rs 3,013-crore on Vadinar refinery faces rejection

29 Feb 2012 Evaluate

Essar Oil’s case against United India Assurance Company for insurance claim of Rs 3,013-crore for the damages sustained by its Vadinar refinery during a cyclone in 1998, has failed to see the light of the day. The overseas tribunal has rejected Essar’s key claim pertaining to advance loss of profits from its Vadinar refinery, detailing that Essar’s Vadinar refinery in Jamnagar district would not have started production within the stipulated time, even without the cyclone that hit the Gujarat coast in 1998.

In effect, Essar has lost the lion’s share of its claim in the case, however, the company has been given Rs 19 crore as part of an interim award for material damages by a three-member tribunal.

Invoking its industrial insurance policy that included advance loss of profits (ALOP) shortly after the cyclone damaged its refinery, construction of which was scheduled to be completed in 1999, the company’s statement indicated that it might approach an Indian court under the Arbitration Act to have the foreign award set aside. According to the company, arbitral tribunal’s verdict is inappropriate as the tribunal has not dealt with certain issues that were put forth during the hearing.

The company had, in 1996, drawn an insurance policy with state-run United India Insurance Co. The same year, United India Assurance issued a policy to Essar Oil that provided the company a cover against all risks to its assets including advance loss of profit.

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Company Name CMP
Reliance Industries 1327.65
Indian Oil Corp. 143.40
BPCL 308.05
HPCL 373.40
MRPL 186.55
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