Insurers Cannot Make Unilateral Changes In Policy Terms During Renewal: NCDRC Holds New India Assurance Liable For Deficiency In Service

Brief Facts of the Case

The complainant, a partnership firm named Aaditya International, engaged in fabric dyeing and printing, had two insurance policies with the New India Assurance/insurer. One policy covered stock and fixtures, while the other covered plant, machinery, and goods. A fire caused by an electric short circuit destroyed their premises, including machinery, stock, and items held in trust. The complainant claimed Rs. 75,61,748 for damages. Despite accepting a salvage value of Rs. 65,000 under duress, the insurer only paid Rs. 16,59,635 for plant and machinery, with Rs. 15,21,825 still owed. The insurer denied coverage for stock held in trust due to an oversight in policy renewal, leading to a loss of Rs. 41,12,113. After unsuccessful attempts to resolve the issue, the complainant filed a consumer complaint with the State Commission of Haryana. The State Commission ruled that there was no deficiency on the insurer's part and dismissed the complaint, following which the complainant filed an appeal before the National Commission.

Contentions of the Opposite Party

The insurer challenged the complaint, stating that the renewed policy did not cover stock held in trust, thus excluding the loss related to such stock from the claim. They paid Rs. 16,59,635 of the remaining claim amount to the complainant. The insurer argued that there was no deficiency in service and that the complaint should be dismissed.

Observations by the National Commission

The National Commission observed that the primary issue was whether the complainant was entitled to indemnification for the loss of stock held in trust. The complainant argued that the policy renewal should have maintained coverage for stock held in trust, as it was covered in the previous policy. The insurer contended that the claim was settled according to the policy terms and that the Court cannot alter these terms. However, it was noted that the insurer should not unilaterally change policy coverage during renewal without the complainant's consent. The Supreme Court has established in cases like United India Insurance Company Limited vs. Manubhai Dharmasinhbhai Gajera and Jacob Punnen vs. United India Insurance Company Limited that insurers cannot make unilateral changes in policy terms during renewal. The National Commission allowed the appeal and overruled the State Commission's dismissal of the complaint. It directed the insurer to pay Rs. 3,093,021 as assessed by the surveyor, with interest @9% from the date the claim was approved.

Case Title: M/S. Aaditya International Vs. New India Assurance Co. Ltd.

Case Number: F.A. No. 694/2017

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