National Consumer Commission Holds Oriental Insurance Liable For Deficiency In Service

Contentions of the Complainant

The complainant operates a Customs Public Bonded Warehouse with a license issued by the Assistant Commissioner of Customs, dealing in timber. Warehouse keepers under this license must insure goods against various risks through policies in the name of the President of India. The complainant obtained a Standard Fire and Special Perils Policy from Oriental Insurance Company. Between February and April 2014, timber logs imported from Myanmar were stored in the complainant's warehouse. A fire incident occurred, causing significant damage, and a police report (FIR) was filed. The insurance company sent a surveyor to assess the damage, and a report was submitted, valuing the claim at Rs. 3,19,56,008 after adjustments for salvage and conditional average. However, the insurance company refused to pay the claimed amount. In response, the complainant has filed a petition with this commission, seeking the amount determined by the survey report, an 18% interest rate, and coverage of legal costs against the insurance company.

Contentions of the Opposite Party

The insurance company argued that, despite more than 12 months passing, the complainant failed to prove that they had a valid reason to insure the properties that were destroyed by fire. It was claimed that the complainant did not own the burnt-down properties or disclose the storage of importers' goods in the insurance policy, which was considered withholding important information. The company also asserted that the damaged goods were held in trust; therefore, no insurance claim was applicable. They pointed out that the risk involving imported goods was not disclosed when the policy was initiated or extended. Additionally, it was contended that the complainant admitted holding the goods in trust for third-party importers, making the claim invalid. The company denied the liability of paying ₹3,19,56,008 with 18% interest, stating that the complainant needed to prove a valid reason for insurance coverage. They refuted the claim of the complainants that the company requested a No Objection Certificate (NOC) from the importers, arguing that this request did not imply acknowledgment of the claim.

Observations by the Commission

The commission noted that the complainant acquired an insurance policy for a Customs Public Bonded Warehouse in the Commissioner of Customs' name. It's acknowledged that a fire occurred, and the necessary customs duty was paid for the logs stored on behalf of importers. The insurance company's claim that the complainant failed to disclose insurable interest and violated policy terms is unjustified. The policy clearly specified that it was obtained in the Commissioner of Customs' name. The insurance company, aware of the warehouse's nature as a Customs Public Bonded Warehouse, approved and extended the policy through due diligence, and it cannot be argued otherwise. In cases where an insurance claim exceeds ₹20,000, the law requires the insurance provider to appoint a Surveyor under Section 64 UM of the Insurance Act, 1938. The Supreme Court, in Sri Venkateswara Syndicate vs. Oriental Insurance Company Limited, emphasized the mandatory appointment of a Surveyor, whose report must be followed unless proven perverse, as clarified in New India Assurance Company Limited vs. Pradeep Kumar. The company rejected the claim, alleging breaches regarding suppressed facts and unproven insurable interest. However, based on invoices, the Surveyor's report disputes these claims, finding the loss value slightly above the ₹85 Crores insured sum. The commission concluded that the company's reasons for denial are unfounded as the Custom Bonded Warehouse scheme doesn't require the insured to own the stocked goods, making the claim valid despite the insurance company's contention.

The Commission directed the insurance company to compensate the complainant the sum of ₹3,19,56,008 with an interest rate of 6% p.a. from the date of the claim till and Rs. 50,000 as the cost of proceedings.

 Counsel for the Complainant: Adv. Ramesh Kainthola

Counsel for the Opposite Party: Adv. J.P.N. Shahi & Adv. Aastha Kaushal

Case Title: M/S Hari & Co. Vs. Oriental Insurance Company Limited & Ors.

Case Number: C.C. No.- 1469/2017

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