Insurance Companies Must Not Repudiate Claims Based On Technicalities, Delhi State Commission Holds New India Assurance Co. Liable

Brief Facts:

The Complainant, an export company, obtained multiple insurance policies from New India Assurance Company (“Insurance Company”). The policy covered loss up to Rs. 1 Crore for stock in the Complainant's premises. However, it incorrectly recorded the address as the first floor instead of the ground floor and the location as Gurgaon, instead of New Delhi. As per the Complainant, the Insurance Company visited the premises before issuing the policy. When the policy was issued, the Complainant pointed out the errors and an endorsement for correcting the location was made.

During the subsistence of the policy, a fire broke out on the premises due to an electrical short circuit from an air conditioner. Three workers were also injured. The Complainant promptly informed the fire services, police, and the Insurance Company. After the Insurance Company's surveyor inspected the site, the Complainant filed a claim for Rs. 95 Lakh. However, after six months, the surveyor estimated the claim payable at Rs. 73,57,656/-. Despite continuous follow-ups, the Insurance Company delayed processing the claim.

The Insurance Company demanded additional documents from the Complainant, which were duly provided. Despite this, the Insurance Company continued to delay the claim. Finally, the Insurance Company repudiated the claim and cited discrepancies in the policy's address and location as the reasons for the same.

Feeling aggrieved, the Complainant filed a consumer complaint in the State Consumer Disputes Redressal Commission, Delhi (“State Commission”).

Contentions of the Insurance Company:

In response, the Insurance Company contended that the Complainant did not qualify as a 'consumer', because the insurance services were being used for commercial purposes. Further, the issue involved complex facts which required extensive oral and documentary evidence, which was unsuitable for summary proceedings. It was further submitted that the fire broke out before the endorsement of changing the address was made by the Complainant. Therefore, it could not be backdated to the fire's occurrence.

Observations by the State Commission:

At the outset, the State Commission relied on Harsolia Motors v. National Insurance Co. Ltd. [1(2005) CPJ 27(NC)], wherein it was held that even commercial users are consumers if the services were availed for consideration. Therefore, it was held that the Complainant qualified as a 'consumer' under the Consumer Protection Act, 2019.

Furthermore, the State Commission observed that since the matter only referred to the demand of the claim amount, which was already assessed by the surveyor, no complex facts were involved. Therefore, the matter was fit for adjudication in the State Commission's summary proceedings.

Regarding the allegation of deficiency in service, the State Commission observed that the Insurance Company had issued an insurance policy with incorrect address details. The Complainant pointed out the faults timely. However, the address was not corrected only after the fire incident. The surveyor also confirmed that the fire occurred on the ground floor of the insured premises. Furthermore, reports from the Delhi Fire Service supported the Complainant's contentions. Therefore, the State Commission held that the Insurance Company's failure to correct the policy details timely constituted a deficiency in service.

The State Commission also referred to Oriental Insurance Co. Ltd. v. M/S Ozma Shipping Company & Anr. [Civil Appeal No. 6289 of 2001], where the Supreme Court held that insurance companies should not avoid genuine claims on technicalities. As a result, the State Commission directed the Insurance Company to pay the claim amount of Rs. 73,57,656/- to the Complainant with an interest of 6%. Additionally it was also directed to pay Rs. 1,00,000/- as compensation for mental agony and Rs. 50,000/- for legal costs.

Case Title: M/s GNE Exports Pvt. Ltd. vs The New India Assurance Co. Ltd.

Case No.: CC No. 330/2015

Advocate for the Complainant: Ms Bhavi Midha

Advocate for the Opposite Party: Ms Navdeep Singh

Date of Pronouncement: 21.10.2024

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