Class-Specific Licence and Conflict of Interest in a Marine Cargo Claim
You hold a surveyor licence endorsed for Fire and Engineering only. An insurer's motor claims manager, who knows you socially, sends you a marine cargo claim: a consignment of machine parts shipped from Shanghai to Chennai was water-damaged; the claim is Rs 42 lakh. The file notes that the insurer's own marine surveyor is on leave. The claims manager says: 'Just do a quick report on our letterhead; we will treat it as a marine survey and no one will question your licence.' While inspecting, you find that the consignee's brother is a 30% partner in your survey firm. You have not yet signed the report.
1. Identify the regulatory breaches if you accept the assignment and submit the report.
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The first breach is licensing. Under Section 64UM of the Insurance Act, 1938 and the Insurance Surveyors and Loss Assessors Regulations, 2015, a surveyor may act only in the class or classes of business for which the licence is endorsed. A Fire and Engineering licence does not authorise a marine cargo survey. Accepting the assignment and issuing a report would be acting beyond licence, and the insurer's suggestion to use its letterhead does not cure that defect.
The second breach is conflict of interest. The 2015 Regulations require a surveyor to disclose any pecuniary or personal interest and to decline an assignment where he, his firm or a relative has an interest in the claim. The consignee's brother being a 30% partner in your firm creates an indirect interest in the insured claimant. Even if you personally did not know earlier, once you know you must not sign or use the information to influence the claim.
The claims manager's instruction is also improper because it asks you to conceal the licence defect. That would breach the code of conduct requiring honesty, independence and compliance with the law.
2. What should you do now? Set out the sequence of actions.
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Do not sign the report. Immediately write to the insurer, with a copy to the claims manager, stating that you are declining the assignment because (i) you do not hold a marine licence and (ii) your firm has a conflict through the partner who is the insured's brother. Return all documents and photographs, do not accept any fee or reimbursement, and do not discuss the claim with the insured or the partner. Preserve confidentiality of whatever you saw.
Advise the insurer in writing to appoint a licensed marine surveyor without delay, and note that the claim should not be settled on the basis of any report prepared by you. If the insurer insists that you proceed, decline firmly and consider reporting the matter to IRDAI. Keep a contemporaneous record of the oral instruction and your refusal. The surveyor should not try to 'regularise' the position by asking another surveyor to sign the report, because that would still involve using an unauthorised inspection.
3. What are the consequences for you and for the insurer if the report is used to settle the claim?
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For the surveyor, acting beyond the licensed class and concealing a conflict can lead to disciplinary action by IRDAI, including suspension or cancellation of licence, a penalty and loss of professional reputation. The report itself would not be a valid survey report. For the insurer, settling a claim on the basis of a survey by an unlicensed or conflicted surveyor would violate Section 64UM and the 2015 Regulations; IRDAI could direct a fresh survey, reopen the claim or take regulatory action. A reinsurer could also dispute the settlement if the underlying survey is invalid.
The correct position is that the claim is not properly surveyed until a licensed marine surveyor reports. The insurer should treat the claim as pending, preserve the cargo and documents, and appoint a replacement surveyor immediately.