Repudiation Of Insurance Claim Without Proper Notice Is Evasive: NCDRC

Brief Facts of the Case

The complainant, a government company, obtained a machinery insurance policy from the National Insurance Company/insurer. The policy covered the plant and machinery with a sum assured of Rs. 25,91,04,226 for a premium of Rs. 3,87,307. During the initiation of a unit, significant noise and vibrations occurred, leading to the machine's shutdown due to high water levels and PRV leakage. Inspections revealed abnormal pressure readings, and the machine was declared non-operational. An incident report was submitted, and damages were reported to the insurer, requesting a surveyor. Despite multiple communications, the insurer repudiated the claim. Following a legal notice with no positive response, the complainant filed the complaint before the National Commission. The complainant has requested the following: payment of Rs. 2,63,19,430 with 18% interest from the claim submission date, totaling Rs. 3,93,76,75 along with Rs. 10 lakhs for harassment due to delayed claim processing; and Rs. 5 lakhs for legal and incidental expenses.

Contentions of the Insurer

The insurer argued that the complainant reported the loss and failed to provide necessary documents despite repeated reminders. The Surveyor's Report highlighted this non-cooperation, hindering a fair assessment of the loss. Furthermore, it was argued that Clause 6 of the Policy specifies that the insurer is not liable for any loss if no notice and completed claim forms are received within 14 days of the occurrence and if the damaged item continues to operate without proper repairs. The complainant submitted the Claim Form and documents after the Survey Report, absolving the insurer of liability. The insurer cited the Supreme Court's decision in Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd., which requires a strict interpretation of insurance policy terms.

Observations by the National Commission

The National Commission observed that although the complainant did not submit the claim form within the specified period, a letter of intimation was sent by the Chief Engineer to the insurer, indicating substantial compliance with the policy's requirements. The insurer acted upon the intimation by convening a joint meeting and preparing minutes without rejecting the claim at that stage. The Commission further observed that the last reminder was sent via speed post and received by the complainant's office. The commission deemed the insurer's conduct in not promptly closing the matter and later repudiating the claim without warning or providing the survey report as evasive.

Consequently, the Commission allowed the complaint and directed the insurer to conduct a final survey based on the documents submitted by the complainant and decide the claim on its merits within 90 days, with each party bearing its own costs.

Case Title: West Bengal State Electricity Distribution Company Ltd. Vs. National Insurance Company Ltd.

Case Number: C.C. No. 409/2020