NCDRC Holds United Insurance Liable For Deficency In Service Due To Wrongful Repudiation Of Insurance Claim

Brief Facts of the Case

The complainant company, Ramdev Masala had an insurance policy for Rs. 20,00,000 from United Insurance/ Insurer through a bank. During the policy period, the stock suffered heavy damage due to atmospheric lightning and flooding. The complainant informed the insurer, initially attributing the damage to a flood but later learnt from the cold storage owner that atmospheric lightning was the cause The insurer repudiated the claim, stating that the policy did not cover flood damage. At the complainant's request, the insurer appointed a surveyor who assessed the loss at Rs. 17,57,930 but doubted the lightning damage claim. Aggrieved by this, the complainant filed a complaint before the State Commission of Gujrat, which dismissed the complaint. Consequently, the complainant appealed before the National Commission.

Contentions of the Insurer

The insurer argued that, according to exclusion clause h(ii) of the policy, losses caused by atmospheric disturbances like storms, floods, and inundations are not covered. Therefore, the complainant's damage was excluded from coverage. It was further contended that there was no proof of atmospheric lightning causing the damage and that the complainant had admitted in correspondence that the loss was due to flooding. It was also argued that the surveyor's report could not be relied upon, as the surveyor had admitted that the policy covered flood risks. Additionally, since the flooding occurred before the reported lightning, it could not be the cause of the damage. The insurer claimed there was no deficiency in their service and that the claim denial was correct.

Observations by the National Commission

The National Commission observed that the surveyor disregarded the complainant company's evidence regarding the damage to the goods. Although it was clear that the cold storage building was extensively damaged by lightning and there was also rain, the surveyor's rejection of this evidence and his finding that the damage was due to morning rain rather than lightning lacked solid evidence. As a result, the National Commission overruled the State Commission's order and allowed the appeal. The Commission directed the insurer was directed to pay Rs. 17,57,930 with interest at 9% per annum.

Case Title: M/S Ramdev Masala Vs. United India Insurance Co. Ltd.

Case Number: FA. No. 213/2011