Insurance Claim Must Be Calculated On Reinstatement Value Basis When Terms Of Policy Provide For Same: NCDRC
Aakanksha Bajoria
29 Nov 2024 5:45 PM IST
The National Consumer Disputes Redressal Commission (NCDRC) bench presided by Justice Sudip Ahluwalia and Rohit Kumar Singh has directed “New India Assurance Co. Ltd.” to re-calculate the insurance claim of the Complainant based on the Reinstatement Value as per the terms of the insurance policy. This means that the insurance company should pay the claimant the full replacement value of the damaged assets without reducing the amount due to depreciation. Further directions have been passed to remove any depreciation which has been taken into account while calculating the claim amount of the Complainant.
Reinstatement of the sum insured policy is the cost of reinstating or replacing your property or assets with new ones of the same kind and quality without any deduction for depreciation or wear and tear. The insured person will get full value of the property or assets regardless of its age or condition.
Background:
The Complainant M/s Jagdish Woollens (P) ltd. took an insurance policy from the Opposite party New India Assurance Co. ltd. under which a total sum of Rs. 3.10 Cr was insured. Thereafter, on account of a fire accident the Complainant sought compensation of its insurance claim under the said policy by lodging a claim of Rs. 1.03 Cr. However, a Surveyor and Loss Assessor was appointed by the Insurance company to determine the amount of claim. On receipt of the survey report, the insurance company deposited a sum of Rs. 44 lakhs only. Another independent licensed surveyor was appointed by the Complainant for due assessment of claims. Consequently, the Complainant filed a Consumer Complaint before the NCDRC praying for compensation of the actual loss suffered.
In the present case, the Complainant raised the issue that the report of the Surveyor appointed by the Insurance Company was tailor-made. Therefore, the report of the independent surveyor as appointed by the Complainant should be referred to. The primary contention was that though the Insurance policy was on a Reinstatement Value Basis, the surveyor of the Insurance Company still assessed the claim on a depreciated basis which was in violation of the terms and conditions of the insurance policy. It was further contended that the insurance company has solely relied on the report of the surveyor and has failed to provide any method through which claim amount was determined. Moreover, the surveyor appointed by the Complainant did not take into account any new bills or documents for assessment of claims.
The Insurance Company, on the other hand, argued that the Complainant was not a Consumer within the meaning of Consumer Protection Act on the premise that the policy was purchased for compensation of loss of a commercial activity. Failure on the part of the Complainant to provide complete documents and bills for assessment of claim on a Reinstatement Value basis was the primary argument raised by the Company. Further, it was argued that there was a prolonged delay of about 2 years in the submission of the survey report by the Surveyor appointed at the behest of the Complainant. It was also argued that the said report was made without any physical examination of the place of occurrence of the incident which is a prerequisite for the ascertainment of claim. Therefore, it is liable to be rejected.
Issues and Observations:
The broad issues which fell for consideration before the bench were:
- Whether the Complainant is a “consumer” as per Section 2(7) of the Consumer Protection Act, 2019?
The bench relied on the judgment in National Insurance Company Limited v. Harsolia Motors and Ors. 2023 SCC OnLine SC 409 wherein it was held that the general nature of insurance contracts is to indemnify the insured against loss arising from a contingent event. Thus, in the present case, the Complainant was held to be a consumer of the Respondent Insurance Company.
- Whether the Surveyor is validly appointed by the Insurance Company?
With respect to this issue, as per Regulation 12 of IRDA (Insurance Surveyors and Loss Assessors) Regulations, 2015 the appointment of Surveyor was required. Further, Regulation 9 (1) of the IRDA (Protection of policyholders' Interests) Regulations, 2002 provides for appointment of surveyor by the general insurer within 72 hours of receipt of intimation from the insured person. In the present case, these regulations were adhered to and therefore, the appointment of surveyor by the Insurance Company was valid.
- Whether reliance can be placed on the survey report of the Surveyor appointed by the Complainant?
The bench held that there was no necessity of appointment of another surveyor by the Complainant since the report of the Surveyor appointed by the Insurance company was not completely disregarded. Reliance was placed on New India Assurance Company Limited versus Sri Buchiyyamma Rice Mill and Another (2020) 12 SCC 105 wherein it was held that the necessity of appointing a second surveyor depends on the facts and circumstances of each case.
As regards the issue of depreciation, the bench observed that the methodology adopted to calculate the claim amount by taking into account depreciation, salvage and market value of the assets was contrary to the Terms and Conditions of the policy. Hence, it shall be assessed on Reinstatement Value basis after due submission of all the bills and documents by the Complainant. Reliance was placed on Oswal Plastic Industries v. Manager, Legal Deptt. N.A.I.C.O Ltd. Civil Appeal No. 83 of 2023 wherein the Complainant was entitled to reinstatement value and not depreciated value as per terms of the policy.
Hence, the Insurance Company was directed to re-calculate the claim amount on the reinstatement value basis. Further directions were issued to remove the depreciation from the report by revising the insurance claim.
Case name: Jagdish Woollens (P) Ltd. vs New India Assurance Company Ltd.
Case Number: Consumer Case No. 1887 of 2019
Date of decision: 11.11.2024
