Can't Decide Insurance Claim On Surveyor's Report If Based On Hearsay Evidence: Telangana High Court

The Telangana High Court has held that if the report submitted by the insurance company surveyor about a particular incident was based on news articles and hearsay evidence, it could not be considered to decide the policy holder's eligibility for the insurance amount. 

Justice P. Sree Sudha concluded that the plaintiff (defendant herein) being acquitted in the criminal case was not responsible for the accident and that the surveyor had not properly assessed the loss. 

"Learned Counsel for the appellant/defendant contended that the defendant company can verify the cause of the blast by an independent inquiry through their surveyor, and as such, even if the plaintiff was acquitted in a criminal case, they are not liable to pay the compensation. The contention of the appellant's counsel is not at all sustainable because the surveyor (D.W.1) simply enquired the local people and relied upon the newspaper clippings and held that the plaintiff alone exploded the factory."

The suit before the trial court was filed for recovery of the policy amount from the appellants to the tune of Rs.13,83,380.

The plaintiffs/respondents (Sri Naga Durga Silk Reeling Industry) before the trial court contended that it had taken a policy from the appellants herein (New India Insurance Co Ltd) for protection of its building, machinery accessories etc to a tune of 16 lakhs, for a period of one year 1998-1999.

A fire broke out at the plaintiff's factory on 17.11.1998, resulting in substantial damage. The plaintiff reported the incident to the police, leading to the filing of a criminal case against them. However, the plaintiff was later acquitted. The plaintiff claimed the insurance amount, but the insurance company denied the claim, stating that the damage was not unforeseen and was fraudulent.

The plaintiff initiated proceedings for recovery before the trial court. The defendant argued that the suit was barred by limitation and that the plaintiff played fraud. The defendant's surveyor contended that the loss was due to willful acts by the insured. The defendant's case was based on the surveyor's report and the delay in reporting the accident.

However, the Trial Court granted the relief. Aggrieved by the said order, the Insurance company filed the present appeal.

Justice Sree Sudha observed that the main contentions raised by the appellants were that they had conducted an independent survey, only after which the claim of the petitioner was denied, and that the petitioner had not approached the Insurance officials in due time.

The Bench noted that the surveyor appointed by the Insurance Company had admitted to filing the report based on newspaper clippings and word of mouth. It was also found that the report did not mention any finding with regard to the extent of losses, etc and held that as such, the report cannot be considered.

It was further held that it was impossible for the claimant to approach the authorities in time due to being confined in the lockup.

The Court modified the judgment and awarded the plaintiff Rs.9,52,000 for the loss and Rs.2,99,880 as pendente lite interest. The total award to the plaintiff was Rs.12,51,880.

The appeal was thus dismissed with costs, and the modified judgment was upheld.

Case No: APPEAL SUIT No.645 of 2008

Counsel for appellant: Kota Subba Rao

Counsel for Respondent: V. Ravi Kirab Rao

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