The National Consumer Disputes Redressal Commission, presided by Subhash Chandra, held that the surveyor's report in an insurance incident can only be rejected based on pervasiveness and arbitrariness Brief Facts of the Case The complainant had availed a Standard Fire and Special Perils Policy covering machinery, stocks, and buildings from the United India Insurance/insurer...
The National Consumer Disputes Redressal Commission, presided by Subhash Chandra, held that the surveyor's report in an insurance incident can only be rejected based on pervasiveness and arbitrariness
Brief Facts of the Case
The complainant had availed a Standard Fire and Special Perils Policy covering machinery, stocks, and buildings from the United India Insurance/insurer for a specified period. Subsequently, a fire broke out in the insured premises, allegedly due to a spark from the generator. The fire brigade was informed, and the fire was controlled after considerable effort. The insurer was notified about the incident and appointed Royal Associates to investigate the cause of the fire. According to the investigator, only waste cotton was destroyed, contrary to the insured's claim that cotton yarn was burned. The final report from the surveyor stated that no remains of cotton yarn were found on the premises; only old cotton was lost. Fire marks on the godown walls were up to one foot high. The exact loss assessment could not be determined without purchase bills, stock records, and other documentation. The surveyor and investigator concluded that the loss was not covered under the policy's specific perils. The insured had submitted an inflated claim of ₹56,00,000, which amounted to misrepresentation and breach of policy conditions. The complainant filed a complaint with the State Commission, and the complaint was allowed. Consequently, the insurer filed a first appeal before the National Commission.
Contentions of the Insurer
The insurer argued that the State Commission directed it to settle the claim on a non-standard basis, i.e., at 75% of the claim, contrary to the investigator and surveyor's reports on which the insurer had repudiated the claim. The insurer contended that the State Commission erred in holding that the claim should be settled on a non-standard basis since the fire was extinguished. They argued that an assessment by a licensed surveyor, as per Section 64UM of the Insurance Act, could not be set aside. The insurer also asserted that the amount assessed by the surveyor was not for the purpose of claim settlement as it was deemed not payable. The State Commission's order was considered erroneous as it failed to appreciate that there was no electricity connection and the DG set was also not working on the day the unit was not operational. Hence, the cause of the fire was not established, and the respondent's claim that the fire resulted from the DG set was a false declaration not admissible under General Condition No. 8 of the policy. The State Commission also ignored evidence at the site noted by the investigator and surveyor, which indicated burnt residue of cotton waste but not cotton yarn, despite the insured's claim of losing 28-29 tonnes.
Observations by the Commission
The commission observed that the surveyor's report, on which the claim was repudiated, cannot be accepted. While a surveyor's report is mandatory for claims exceeding ₹20,000 as per Section 64UM of the Insurance Act and is considered an important document according to the Supreme Court in Sri Venkateshwara Syndicate, the Supreme Court has also stated in New India Insurance Co. Ltd. Vs. Pradeep Kumar (2009) that a surveyor's report is not the final word and can be rejected if found perverse and arbitrary. In this case, the State Commission found the surveyor's report unreliable because it did not consider that the DG set could have caused the fire, did not engage with the complainant to determine the extent of the loss, and ignored the audited balance sheet provided by the Chartered Accountant. To reject a surveyor's report, it must be shown to be perverse and arbitrary. The commission noted that there is no evidence to confirm that approximately 28-29 tonnes of cotton yarn were stored in the warehouse. The State Commission's conclusion that the records were likely destroyed in the fire was speculative and was not claimed by the complainant. Therefore, the State Commission's order was overturned. Additionally, according to the Khatema Fibres case, the State Commission should not have subjected the surveyor's report to forensic examination and assessed the claim on a Non-Standard basis.
Based on these grounds, the commission allowed the appeal by the insurer.
Case Title: United India Insurance Co. Ltd Vs. M/S. Khadi Udhyog
Case Number: F.A. No. 223/2022