NCDRC Dismisses Complaint By Five Star Hotel For Insurance Claim Of Rs. 5 Crores Against New India Assurance

Brief Facts:

The complainant, a Five-Star Deluxe Hotel, sought compensation from the Insurer for losses and damages caused by unprecedented flash floods in Mumbai. The Hotel's properties were insured under two insurance policies, and the flooding resulted in damages to buildings, plant and machinery, and other assets. The initial estimate of the loss was Rs. 5 crores, and a claim bill of Rs. 6,91,93,420/- was submitted by the Surveyor and accepted by the Insurer. However, the final survey report reduced the damages to Rs. 4,19,99,497/- as the location of risk and description of risk when read together indicated that only damaged stock located within the insured premises would be covered by the Policy. Stock located at any other places including Galleria and its basements, cannot come within the scope of coverage as they fall outside the scope of the “insured premises”.

The Insurer allegedly suppressed the final survey report for 21 months and offered a significantly lower compensation of Rs. 37.57 lakhs, which was rejected by the complainant. The complainant argued that they had paid a premium of approximately Rs. 22 lakhs and suffered a loss of around Rs. 6 crores, while the Insurer's offer without assigning any reasons violated principles of natural justice. The complainant accused the Insurer of deficiency in service in the settlement of their claim for the loss.

Contentions of the Insurer:

The insurer argued that the complaint should be dismissed as the complainant does not meet the definition of a 'Consumer' under the Act as the Hotel operates for profit, and it should file a civil suit in a civil court instead of approaching a Consumer Court. Secondly, the complaint required a detailed examination of evidence, witnesses, and numerous documents, making it unsuitable for summary judgment as outlined in the Act. The insurer claimed that the preliminary survey report only summarized the initial items of the claim, which still needed to be verified. Additionally, it accused the complainant of deliberately suppressing the main issue regarding policy endorsement and making frivolous and unfounded allegations about the proceedings of the Commission and requested the dismissal of the complaint with exemplary costs.

Observation of NCDRC:

The NCDRC observed that the surveyor made an error by treating the articles covered under the second policy as those under the first policy, leading to a conclusion of underinsurance. The surveyor failed to understand that the complainant operates a hotel and is not involved in selling machinery or furniture, fittings, and fixtures (FFF). Therefore, the first policy did not cover plant and machinery or FFF, and they could not be included in the claim.

Additionally, the Stock located in places like the Galleria and its basements were outside the scope of coverage as they were not part of the "insured premises." The insurer was required to issue an endorsement to cover the Galleria, but no such endorsement was issued. The complainant did not produce any documents or policy with the endorsement. It was noted that the Galleria and its contents were covered under a separate policy with another insurance company, indicating that they were not covered under the existing two policies obtained from the insurer. Therefore, the loss on account of rain and flood in the Galleria could not be claimed under the other two policies.

In conclusion, the NCDRC was of the view that the initial assessment of loss by the surveyor included the loss incurred in the Galleria, which as per the final report was not to be covered by the insurance policies and therefore, dismissed the complaint filed by the Hotel.

Case: M/s Hotel Leela Avenue Ltd. vs New India Assurance Co. Ltd & Anr.

Counsel for the Complainant: Mr. Abhimanyu Mahajan, Advocate, Ms. Anubha Goel, Advocate, Mr. Mayank Joshi, Advocate and Ms. Shambhavi Kala, Advocate

Counsel for the Opposite Party: Mr. Vishnu Mehra, Advocate, and Mr. Kunaal Malhotra, Advocate

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