Surveyor's Report Can't Be Rejected Unless Arbitrary: NCDRC

Brief Facts of the Case

The complainant, a poultry feed producer, stored raw and finished materials in a building insured by United India Insurance Company Limited/insurer through Andhra Bank. The policy covered spontaneous combustion. Subsequently, one day the workers noticed flames from the de-oiled rice bran stock, but due to the heat, which was eventually put out by the fire service. The insurer sent surveyors and an investigator to assess the damage and verify the purchase of raw materials. Despite submitting all necessary documents and segregating damaged stock, the insurer delayed settling the claim. The salvage was sold for Rs.62674. Frustrated by the delays, the complainant filed a complaint before the State Commission of Andhra Pradesh, which allowed the complaint. It directed the insurer to pay Rs.3090521 with interest @9% per annum as the insurance claim along with a compensation of Rs.20000 and Rs. 10,000 as the cost of litigation. Consequently, the insurer appealed to the National Commission.

Contentions of the Insurer

The insurer argued that after being informed of the fire by Andhra Bank, they sent a preliminary surveyor and later a second surveyor, who inspected the site and requested documents for loss assessment. The insured submitted a claim for various materials, but some documents were not provided. An investigator found discrepancies in the claimed storage capacity and no physical evidence of fire damage. The investigator and surveyor also faced uncooperative suppliers and could not verify the insured's purchases. Due to a lack of proof and cooperation, the investigation concluded the loss was not substantiated. Additionally, the policy location did not match the fire-affected location. The insurer denied the claim, citing no deficiency in service, and called for the complaint's dismissal.

Observations by the National Commission

The National Commission observed that the State Commission disregarded the surveyor's findings, which the Supreme Court held in Khatema Fibre Limited Vs. New India Insurance Company Limited, 2021 SCC OnLine SC 818 to be within regulatory guidelines unless arbitrary. The commission highlighted that the insurer claimed the purchase of de-oiled bran before the fire incident, yet evidence of payment was lacking. Coupled with discrepancies in claimed and physically verified weights of damaged stock, the insurer invoked Condition-8 of the policy, which forfeits benefits in cases of fraudulent claims or false declarations. The commission referred to New India Assurance Company Limited Vs. Pradeep Kumar (2009) 7 SCC 787, wherein the Supreme Court emphasized that the surveyor's report is not infallible. However, the insurer contended that the claim was exaggerated and subject to repudiation under Clause 8 of the policy without sufficient evidence of payment. The commission stressed that the State Commission should have objectively considered the evidence, including the surveyor's report, which it failed to do the same. The commission ruled that given the unproven payments and discrepancies, the insurer's repudiation of the claim under Clause 8 of the policy was lawful.

The National Commission allowed the appeal and dismissed the State Commission's order.

Case Title: United India Insurance Co. Ltd. Vs. Shree Sai Laxmi Poultry Feeds & Anr

Case Number: F.A. No. 246/2009