Insurance Survey Reports Do Not Hold Ultimate Authority And Can Be Disregarded If They're Arbitrary In Nature: National Consumer Commission

Contentions of the Complainant

The complainant, now deceased, is represented by its proprietor, a business engaged in manufacturing Woolen Carpet Yarn, which had its unit insured by New India Assurance Company. A fire occurred at the factory premises during the insurance policy period, causing damage to stock, machinery, and buildings, resulting in a loss of Rs. 61,08,700. The complainant informed the insurance company, which sent a surveyor to assess the damage but failed to submit a report and settle the claim. Through the Right to Information Act, the complainant learned that the surveyor had assessed only Rs. 11,49,908, far below the actual loss claimed. Despite protests and reminders from the complainant, the insurance company did not take action. The insurance company responded that they were seeking clarification from the surveyor and assured a prompt reply. The complainant alleges that the insurance company is neglecting their duty to settle the claim and filed a complaint with the State Commission, which was dismissed. The present complaint is a first appeal filed by the complainant before the National Commission.

Contentions of the Opposite Party

The insurance company argued that the complaint should be dismissed because the Zonal Manager of New India Assurance Company Limited wasn't included as a party, making the complaint invalid. They also claimed the complaint was premature because the complainant's claim was still being assessed and blamed the complainant for not submitting the necessary documents on time. Additionally, they argued that the State Commission didn't have jurisdiction over the case. The insurance company stated that the surveyor had assessed the loss at Rs. 11,49,908, not Rs. 61,08,700, as claimed by the complainant, and accused the complainant of trying to extract money without genuine documents. They pointed out discrepancies in the complainant's claims, noting that while they had claimed a large amount in insurance, they reported zero taxable income in their tax returns, suggesting contradictions in their version. The insurance company asserted that they did not provide deficient service.

Observations by the Commission

The commission pointed out that the main issue revolves around the accuracy of the survey report in this case. They noted that the surveyor initially admitted that the stock was severely damaged and couldn't be physically verified for quantity. However, the surveyor later claimed to have estimated the quantity based on volumetric analysis without providing details or justification. The commission found it concerning that the surveyor disregarded all the documentary evidence presented by the insured, including audited balance sheets, profit and loss accounts, purchase and sales bills, and sales tax returns, which supported their claim that the stock's value at the time of the fire was Rs. 33,13,300. Additionally, the commission emphasized that the State Commission relied on income tax return copies to conclude that if the return showed zero tax payable, the claimed stock value must be incorrect. However, they questioned how such a conclusion could be reached without considering the accounts on which the income tax returns were based and the calculation of taxable income. They explained that tax returns consider various deductions from the trading account to determine net profit, and deductions are allowed for taxes already paid. Therefore, no definitive conclusion about the stock's value can be drawn from the amount of tax payable without examining supporting documents. The commission referenced the case of New India Assurance Co. Ltd. v. Pradeep Kumar to highlight that the survey report isn't the ultimate authority and can be challenged if there are valid reasons to do so. The commission further observed that the surveyor's report lacks justifiable reasons and factual basis, making it unreliable and arbitrary. Since the report is based on arbitrary valuations and doesn't provide any reasons for disregarding the documents provided by the insured regarding the stock loss valuation, it should be disregarded.

The commission overruled the order by the state commission and directed the insurance company to pay Rs. 1,28,000 and Rs.2,17,956 towards the cost of the loss sustained by the building and the machinery. Furthermore, the commission directed the company to pay Rs. 30,62,104 after deducing Rs.10,000 on account of policy excess (as per surveyor's report) along with interest at the rate of 9% per annum from the date of complaint realization.

Case Title: M/S. Jain Rugs Vs. New India Assurance Co. Ltd. & Ors.

Case Number: F.A. No. 185/2013

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