NCDRC Holds United India Insurance Liable For Denial Of The Insurance Money

Contentions of the Complainant

The complainant, a pharmaceutical manufacturer, availed a Standard Fire and Special Perils Policy from United India Insurance, covering stocks worth Rs 2,00,00,000 and the building for Rs 1,50,00,000. A fire occurred in their office-cum-godown, prompting Fire Brigade intervention and an FIR filing. The Drug Inspector and an insurer-appointed surveyor inspected the premises, and Truth Labs, a forensics laboratory, was examined at the surveyor's request. Despite the Police and Fire Departments attributing the fire to an electrical short circuit, the insurer rejected the Rs 2,22,36,413 claim. The repudiation was based on reports from the surveyor and Truth Labs, suggesting external induction of the fire using ignitable accelerants. The complainant received Truth Labs' report showing the presence of hydrocarbons and alcohol in the burnt debris. The complainant contested the repudiation, alleging arbitrariness and presenting scientific arguments. They argued that the fire's cause was wrongly determined as external ignition instead of hydrocarbons, emphasizing the Police Station's report supporting an electrical short circuit. The complainant argued that it had the requisite approvals to carry on the wholesale business of sale and distribution of pharmaceutical products through a license and insurance cover, which covered the stock available on the insured premises. In their petition to the commission, the complainant seeks compensation of Rs 2,22,36,413 along with 24% per annum interest from the repudiation date for the fire-related loss. Additionally, they request Rs 13,19,966 with 24% per annum interest for damages to the building and Rs 10,00,000 as compensation for service deficiency.

Contentions of the Opposite Party

The insurer contended that a surveyor was appointed to assess the loss who physically inspected the premises, and a forensic report was deemed necessary to establish the fire's cause, leading to the engagement of Truth Labs. The lab report concluded that the fire resulted from ignitable fire accelerants. Furthermore, the surveyor observed expired stocks in the godown, some dating up to 7 years ago or expiring within 1 to 2 months. The conclusion was that the presence of outdated stocks constituted a suppression of material facts, violating condition no. 1 of the Policy. It was argued that the stock inventory details were not shared with the surveyor, violating condition no. 6 of the policy. The surveyor's report assessed a non-payable loss of Rs 7,17,627 based on the provided information, and the claim was deemed non-admissible, considered fraudulent, and repudiated based on violations of conditions 1, 6, and 8 of the Policy. The insurer argued that the complaint was time-barred and considered the surveyor's report valid and evidence-based, dismissing the Electricity Department's report on a short circuit as inconclusive due to the lack of forensic examination.

Observations by the Commission

The commission observed that the insurer rejected the claim solely based on the surveyor's conclusion, supported by evidence on-site, available documents, and forensic investigations from Truth Labs. The complainant did not dispute that the stocks were expired or expired. However, the insurer did not acknowledge the argument that the godown's pharmaceutical products and other materials included petro products with a hydrocarbon content detectable by Truth Labs. The commission highlighted that the insurer presented no substantial or direct evidence to prove that the complainant caused the fire. It was noted that the stocked materials covered under the insurance policy might have been ignitable due to their inherent nature, a factor considered by the insurer when providing coverage. The rejection of the claim was based on the belief that the fire was accidental and attributed to the complainant by the surveyor's findings through the forensic examination by Truth Labs. However, the commission deemed this conclusion unsupported by concrete evidence, relying more on speculation. Referring to a Supreme Court ruling in Canara Bank vs United India Insurance Co. Ltd., 2020, the commission emphasized that the surveyor's conclusion cannot be accepted without evidence establishing a direct connection between the insured and the cause of the fire. Furthermore, the commission dismissed the insurer's argument about concealing material facts; neither the proposal nor the renewal form was presented to the commission. Additionally, regarding the insurer's delay and deficiency in service in settling the complainant's claim fairly and promptly, the commission deemed it warranted to request interest on the amount payable.

The commission directed the insurer to pay an amount of Rs.2,22,36,413 towards loss of stock and Rs.13,19,966 towards loss on account of damage to the building with interest @ 6% with no cost to the proceedings.