Wrongful Rejection Of Claim: NCDRC Directs United India Insurance To Pay Compensation To DCW Ltd.

The Commission set aside the Maharashtra State Commission’s order which had dismissed the complaint by the Complainant. It directed the Insurer to pay Rs. 23,09,051/- towards the claim in respect of the damage to the DG set with simple interest @ 8% per annum within 3 months.

Brief Facts:

The Complainant, a manufacturing company, involved in the production of caustic soda, synthetic rutile, PVC, etc. bought an Industrial All Risk Policy from the Insurer to protect a Captive Power Plant containing 6 DG sets. During the policy period, DG Set No. 5 experienced an accident causing damage to the DG set and other equipment. The Complainant informed the Insurer about the damage and engaged Rastek Pvt. Ltd., an expert, to investigate the cause of the damage which submitted a report with their findings.

Subsequently, the Insurer appointed Shri Anantha Padmanaban, an Authorized Surveyor, to conduct a survey of the damage. He observed that the Complainant allowed the DG set engine to run for 10 days with decreasing oil pressure, which indicated gross negligence on its part. As a result, the Complainant filed an insurance claim for Rs. 54,34,858/-.

However, the Surveyor evaluated the claim at Rs. 35,53,868/-. Based on the reports from the Surveyor and the Expert, the Insurer rejected the insurance claim and referred to Clause 2(a) of the insurance policy excluding claims arising from "any intentional act or intentional negligence on the part of the insured or anyone acting on their behalf."

Thus, the Complainant filed a Consumer Complaint before the State Commission, claiming Rs.54,34,858/- with interest @18% p.a. and amount of Rs.5 Lakhs as exemplary damages.

The State Commission dismissed the complaint and held that there is no deficiency in service by the Insurer and the repudiation of the insurance claim cannot be constructed as an arbitrary one. It highlighted that no prompt steps were taken by the Complainant to prevent damage to DG set as observed by the surveyor and the expert evidence.

Contentions of the Insurer:

The Insurer had contended before the State Commission that the insured DG Set was managed negligently and the Complainant should have promptly shut down the machine when the alarm triggered to prevent further damage. Further, it argued that the complainant’s argument that the engine couldn't be abruptly stopped lacked logical reasoning. On the day of the incident, the engine tripped and stopped at full speed. Therefore, the notion that the engine couldn't be stopped during an emergency doesn't hold. The Insurer stated that it was indeed possible to transfer the load to other engines and shut down this specific engine well in advance of the failure, especially when the insured had recorded the observed lube oil pressure drop. This finding was backed by the surveyor and expert, Mr. K Gopalkrishnan.

Observations of the Commission:

The NCDRC allowed the complaint and set aside the order of the Maharashtra State Commission observing a deficiency in service on the part of the Insurer. It held that the assertion of willful negligence due to mishandling of the DG Set when the lube oil pressure was below the manual's specifications was a mere presumption. Moreover, there is no documented requirement for specific actions by the Complainant when the lube oil pressure ranges between 5.5 to 4.8 bar.

Further, the Commission pointed out that apart from the two reports from the same Surveyor, there is no independent evidence presented to establish negligence bordering on willful negligence as the cause for the DG set's trip-off and the subsequent damage. Additionally, there is no clear link established between the alleged delay in switching off the DG set and the resulting damage, and thus the failure of the DG set was unprecedented for the complainant.

The Commission highlighted that there was no ground or reasonable basis for the rejection of the Insurance claim since no commission appears on the part of the Complainant.

The Commission, in conclusion, held the Surveyor’s valuation of the liability for the damage caused to the DG set as Rs.23,09,051/- as reasonable and to be in terms with the insurance contract. It ordered the Insurer to pay Rs. 23,09,051/- to the Complainant for the damage to the DG set with simple interest @ 8% per annum within three months from the date of this order.

Case Title: DCW Ltd. vs. United India Assurance Co. Ltd. & Anr.

Counsel for Complainant: Mr. Vinay Kumar Mishra, Advocate & Ms. Nikita Sharma, Advocate

Counsel for Opposite Parties: Mr. Maibam N. Singh, Advocate

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