Denial Of Insurance Claim Is Justified In Case Of Breach Of Insurance Contract By The Insured Person: Delhi State Commission
Aakanksha Bajoria
2 Dec 2024 8:00 PM IST
Delhi State Consumer Disputes Redressal Commission ruled that denial of insurance claim by “United India Assurance Co. ltd.” is valid where the insured person violates the terms of insurance policy. A coram of President Sangita Dhingra Sehgal and Judicial member Pinki held that non-submission of requisite and essential documents ,as per the terms of policy, by the Complainant for due assessment of claim would constitute a breach of insurance contract.
Brief background:
The Complainant is a private limited company engaged in the business of publishing, printing and bookbinding. A fire accident damaged valuable assets of the Complainant Company for which a claim was lodged with the Insurance company. A surveyor came to be appointed for assessment of claims. All documents as demanded by the surveyor were provided by the Complainant still there was no compensation provided. Moreover, the Complainant's bank also urged the insurer company to grant the compensation but no adequate response was received. Hence, the Complainant approached the consumer forum praying for grant of insurance claim.
United India Assurance raised objections to the complaint on maintainability, breach of insurance contract and other grounds. It was argued that the Complainant is not 'consumer' within the Consumer Protection Act, 1986 as the insurance was taken for a commercial purpose. It was further stated that the Complainant is in non-compliance with one of the material conditions of the Insurance policy which required due submission of all documents with respect to the claim. Hence, the denial of claim is justified.
Issues and observations:
- Whether the complainant is a 'consumer' under the Consumer Protection Act?
As per law, a person who avails any service for a commercial purpose is not a consumer under the Consumer Protection Act. However,, the bench relied on the decision in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Ors. (2020) 2 SCC 265 wherein it was observed that purchase of goods/services must have a close connection with a profit generating activity in order to constitute a 'commercial purpose'. Merely because a person is a commercial enterprise, it cannot be excluded from the definition of 'consumer'.
The bench further placed reliance on the judgment in India Insurance Company Limited v. Levis Strauss (India) Private Limited wherein observations were made that an Insurance contract is a contract for indemnity of a defined loss and there is no profit to the insured person.
In view of the above judgments, the bench held that availment of service of insurance policy is for indemnifying a loss which may arise from future events. The complainant will not generate any profit from the compensation of insurance claim. Rather, it will place the complainant in the same position in which he was before the fire accident. Hence, the Complainant was held to be a 'consumer' under the Act.
- Whether there was a violation of the terms and conditions of insurance policy?
Condition 6(1)(b) of the insurance policy mandated the insured person to provide all relevant documents, investigation reports, proofs, etc. with respect to the cause of fire along with the information on damages. It was observed that the Complainant failed to provide Book of Accounts, documents and other information. Moreover, there was a failure on the part of the Complainant to conduct a joint physical inspection of the inventory of the damaged stock which was essential for computation of claim. Such acts demonstrated a clear lack of cooperation by the complainant and a breach of the insurance contract which materially affected the insurer's ability to calculate the claim. Thus, it was held that the insurance company was justified in denying the claim amount.
Hence, the complaint was dismissed by the State Commission.
Case Name: Majestic Graphic and Machinery India Pvt. Ltd. vs United India Insurance Co. Ltd.
Case number: Complaint Case 484/2013
Date of decision: 22.11.2024
