The National Consumer Disputes Redressal Commission, presided by Mr. Subhash Chandra and AVM J. Rajendra in an appeal against United India Insurance held that a surveyor's report is mandatory for insurance claims and it can only be rejected on reasonable grounds. Brief Facts of the Case The complainant had three insurance policies( Fire Policy, Machine Breakdown...
The National Consumer Disputes Redressal Commission, presided by Mr. Subhash Chandra and AVM J. Rajendra in an appeal against United India Insurance held that a surveyor's report is mandatory for insurance claims and it can only be rejected on reasonable grounds.
Brief Facts of the Case
The complainant had three insurance policies( Fire Policy, Machine Breakdown Policy & Deterioration of Stock Policy) with United India Insurance/insurer. On January 9, 2004, an ammonia gas cylinder leaked, causing structural damage and a short circuit, leading to a fire. The fire was controlled after 3-4 hours. The insurer was informed, and a surveyor found only the building damage was covered, excluding plant and machinery. The claim was Rs. 47,53,627.60 (Rs. 27,52,265.80 under Fire Policy and Rs. 20,01,361.80 under MB Policy) with 18% interest, Rs. 10,00,000 as compensation, and Rs. 10,00,000 for mental agony. The insurer approved Rs. 1,20,168 after deductions. However, a prior cheque for Rs. 87,000 was rejected. The complainant challenged this decision before the State Commission of Uttar Pradesh, which allowed the complaint. It directed the insurer to make a payment of Rs 1,20,168, Rs 10,000 for mental agony and Rs 5,000 for litigation expenses. Dissatisfied, the complainant filed an appeal before the National Commission.
Contentions of the Insurer
The insurer argued that the fire policy availed by the complainant only covered the building. The complainant stated the fire brigade report confirmed a short circuit caused the fire in the machine room. The insurer alleged a delay in notifying the fire brigade worsened the damage. The surveyor found 46.667% under-insurance for the building and stated machinery and potato stocks were not covered under the Fire Policy. As a result, the assessed loss of Rs. 1,20,257.71 was deemed reasonable by the surveyor.
Observations by the National Commission
The National Commission observed that from the foregoing, it is clear that the complainant's claim was evaluated based on the surveyor's report and the scope of the three insurance policies. The fire and the resulting loss are not in dispute. The complainant argued that plant and machinery, as well as stocks, were excluded under the policies, which covered only the building. The complainant contended that plant and machinery could not be treated as part of the building since a separate policy covered them. The Hon'ble Supreme Court in Sri Venkateswara Syndicate vs. Oriental Insurance Co. Ltd. & Anr. held that claims above Rs. 20,000 must be surveyed by an authorized surveyor under Section 64-UM of the Insurance Act, 1938. While the surveyor's report holds significant value, it can be rejected only with valid reasons. The insurance company cannot appoint multiple surveyors arbitrarily to obtain a favorable report. The complainant alleged malafide intentions by the surveyor, questioning the reliance on reconstruction costs and excluding the balance sheet. Since plant and machinery had a separate breakdown-only policy, the complainant should have ensured comprehensive coverage under the building policy. No documentary evidence supported the inclusion of machinery under the building policy except for the balance sheet and post-incident reconstruction costs, which cannot be accepted. The Commission highlighted that the complainant's reliance on Pradeep Kumar (2009) 7 SCC 787 and the argument that policy terms were not disclosed were found baseless. The policy details were on record, as referenced by the State Commission. The National Commission upheld the State Commission's order and dismissed the appeal. The insurer was directed to comply with the order within 45 days, failing which interest at 9% per annum would apply until realization.
Case Title: M/S. Hundi Lal Jain Cold Storage & Ice-Factory Pvt. Ltd. Vs. United India Insurance Co. Ltd.
Case Number: F.A. No. 214/2017