Repudiation Of Fire Insurance Claim For Lose Wiring, Can't Be A Ground, Karnataka State Commission Allows Claim

Brief Facts:

The Complainant, a proprietor dealing with various seeds and commodities, had obtained a standard fire and special peril policy covering his stock regularly from Oriental Insurance Co. Ltd. (“Insurance Company”). On 2.7.2010, a fire broke out at his factory premises, resulting in significant damage to the stock, machinery, and the building. The Complainant promptly informed the authorities, including the Insurance Company, and submitted the necessary documentation for claim settlement. Despite the submission of required documents, including a survey report estimating the loss, the Insurance Company did not settle the claim, alleging lack of cooperation and non-submission of critical details. Following the death of the Complainant during the trial, his legal representatives were brought into the case, and an amended complaint was filed in the State Consumer Disputes Redressal Commission, Karnataka (“State Commission”).

The Insurance Company contended that the Complainant had failed to provide essential details and documents necessary for processing the claim. Despite repeated requests, the Complainant did not comply, leading the Insurance Company to close the claim file due to non-cooperation. The Insurance Company further argued that the fire accident was primarily due to the Complainant's negligence in maintaining defective wiring at the premises. They contended that as per the terms of the insurance policy, they were not liable for such events. They emphasized that they had promptly appointed a surveyor upon receiving the claim and repeatedly requested the necessary documents from the complainant, but to no avail. Therefore, they asserted that there was no deficiency of service on their part.

Observations by the Commission:

The State Commission observed that the fire was attributed to a loose electrical wire, as reported by the appointed investigator. However, despite the surveyor's visit to the site, no assessment of loss or valuation of destroyed stock was provided. The Insurance Company, based on this investigation, deemed the claim non-compensable, citing the root cause of the fire as the reason.

The State Commission, however, found this reasoning inadequate, asserting that the occurrence of the fire was undisputed, and the root cause, while identified, should not automatically lead to claim repudiation, especially when the policy explicitly covers fire accidents. Therefore, the Insurance Company's decision to deny the claim solely based on the root cause was deemed deficient in service.

Moreover, the Complainant presented an assessment by their auditor, valuing the loss at Rs. 53,50,786/-. Despite the absence of a specific assessment from the appointed surveyor, the State Commission considered the auditor's report valid, holding the Insurance Company liable to pay this amount to the Complainant's legal representatives. It further directed the Insurance Company to pay a compensation of Rs. 5.00 lakh for deficiency in service. Litigation costs of Rs. 25,000/- were also awarded to the Complainant's legal representatives.

Case Title: Kambalimath Ginning Factory vs Oriental Insurance Co. Ltd.

Case No.: Complaint Case No. CC/169/2013

Advocate for the Complainant: Sri K.R. Anatha Murthy

Advocate for the Respondent: Shri H.C. Vrushabendraiah

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