NCDRC Holds Oriental Insurance Liable For Deficiency In Service While Holding That Filing Two Claims For Same Occurrence Is Unsustainable

Brief Facts of the Case

The complainant company, which was involved in bridge construction, secured a “Contractors All Risk Insurance Policy” from Oriental Insurance/insurer. In September 2011, floods in the river Sone caused significant damage, washing away two temporary steel bridges and plain cement concrete. The complainant informed the insurer but received no response initially. After further reminders, the insurer conducted a loss assessment survey. The surveyor's report acknowledged the claim's validity but applied excessive under-insurance and two excess clauses, reducing the claim to nil. The insurer officially repudiated the claim. Aggrieved, the complainant filed a complaint with the State Commission of Punjab, which allowed the complaint. It directed the insurer to pay the claim amount of Rs.72,83,400 after deductions, interest at 12% on the claim amount for deficiency, and Rs.11,000 for litigation expenses. Consequently, the insurer appealed to the National Commission.

Contentions of the Insurer

The insurer contested the complaint by arguing that the complainant, being a commercial entity, did not qualify as a 'consumer' under the Act, rendering the complaint unmaintainable. The insurer argued that their surveyor assessed the liability as 'nil' based on the policy terms and conditions, and therefore, they were not liable to pay any amount to the complainant. Additionally, the insurer asserted there was no deficiency on their part.

Observations by the National Commission

The National Commission observed that the main issue to be decided was whether there were two occurrences leading to separate losses. Upon reviewing the record, including the surveyor's report, River Water Level Data, and Newspaper Report, it was evident that the river Sone experienced a flash flood, causing high water levels between the two specific dates mentioned. The complainant company could only assess its losses after the water receded, which included the washing away of two bridges. The river water remained high during this period, and the surveyor also referred to this as one 'occurrence' in the report. Considering the facts and circumstances, the commission concluded that this was a case of one occurrence resulting in the loss of two bridges. Filing two separate claim forms for the bridges did not change the nature of the occurrence and loss. Thus, the State Commission's finding on this point was upheld. Since there was only one occurrence, applying the excess clause twice was deemed unsustainable. Regarding the rate of under-insurance, the surveyor reviewed the insured's work contract and the escalation clause but did not provide reasons for not considering the escalation clause in calculating the under-insurance percentage. The commission agreed with the State Commission that under-insurance should be taken at 9% instead of 21.07%. The commission noted that a survey report is not the final word and can be rebutted with sufficient reasons, citing the Supreme Court's judgment in New India Assurance Co. Ltd. v. Pradeep Kumar. The commission found that an interest rate of 9% per annum on the awarded amount would be appropriate and at par with the loss and injury suffered by the complainant company.

The National Commission modified the State Commission's order such that the insurer was to pay a sum of Rs. 72,83,400 along with interest at a rate of 9% per annum until payment and Rs. 11,000 as litigation expenses.

Case Title: Oriental Insurance Company Ltd. Vs. M/S. S. P. Singla Construction Pvt. Ltd

Case Number: F.A.No. 943/2016