Vietnamese insurance company Bao Minh has been sued by a local shipbuilder for allegedly denying an insurance claim of US$4.1 million for damages caused by a storm in 2009, VnExpress reported Saturday.
According to the Dung Quat Shipbuilding Industry Company (DQS), a unit of state-owned oil and gas group PetroVietnam, the companies signed a two-year contract in 2006 under which the shipbuilder was required to pay a total premium of VND4.7 billion ($228,700) to have a business project covered.
The contract stipulated that DQS had to pay half of the premium, or around VND2.4 billion, within the first 15 days. The rest of the money would be paid on the project completion.
DQS, however, paid only VND2 billion. But it noted that during the two-year term of the contract, Bao Minh never issued any document to end the contract on ground that the shipbuilder failed to hold up its end.
When the contract expired in December 2008, DQS was still working on the project to build an oil tanker of 100,000 tons. As a result, it agreed to an additional premium fee of VND2.5 billion to have the contract extended through February 2010.
During this extension period, on September 28, 2009, a major storm hit the central region and caused damage to the ship. The loss was valued by assessment company Matthews Daniel at around $4.1 million, VnExpress reported.
DQS insisted that the claim was covered under the policy, but Bao Minh denied it, arguing that its client did not fulfill the payment obligation in the first place.
"Under the Insurance Law, when the client did not pay the premium fees, the insurer has the right to deny a claim," an unnamed official of Bao Minh said, adding that DQS can bring the case to court.
Nguyen Ngoc Tuyen, a representative of DQS, told VnExpress that Bao Minh was wrong when refusing to cover the damages. Even if his company was behind on its payments, the insurer never said anything about ending the contract, he said.
"If Bao Minh wanted to end the contract because of the late payment, why did they agree to extend it for another year?" he asked.
Tuyen added that the claim of $4.1 million cannot hurt Bao Minh's business because, at the end, it was foreign insurers who would have to pay for most of it. "I think Bao Minh would only have to pay no more than VND5 million."
The People's Court in the central province of Quang Ngai is still processing the case. No trial date has been announced.