Findings Of Surveyor Not Substantiated; Repudiation Of Insurance Claim Illegal, NCDRC

The insured obtained “Standard Fire and Special Perils Policy from The New India Assurance Company Ltd (Insurer) for a sum of 9 crore rupees. A fire broke out in one of the furnaces at the factory of the Insured and the Insurer was informed of the same. The Insured set up a committee of Senior Technical Officers of the factory to ascertain the cause of the fire, and they listed out four possible reasons for the same. The insurer appointed a surveyor to assess the losses and he informed Insured that all 4 possible reasons for initiation of fire as given by the Insured were not liable to be accepted.

The insurer also later appointed a technical expert to find the cause of the fire and submitted that the essential safety devices Buchholz Relay and On Load Trap Changer (O.L.T.C)., in such a setup were there but either these devices were bypassed, or they were not in working condition. He also found that even the furnace transformers are provided with battery of protective devices, but the same was also not maintained resulting in 4-5 major transformer breakdowns within a period of 9 months and stated that the Insured was indifferent to the necessity of protective devices/equipment.

The surveyor observed that as the fire was originated from inside the transformer due to overload and most essential safety device i.e., Buchholz Relay was not having a certain element inside the relay to indicate extent of gradual deterioration and warn for timely protection. According to the insurer, since it was clear that the insured had not exercised sufficient caution and safety measures when using the transformer, the insurer is not to be held responsible for the damage. The insured's negligence caused the loss, which went beyond the scope of insurance coverage. Therefore, the claim was repudiated.

The insured filed this complaint before the NCDRC as a consequence of the repudiation. The NCDRC bench went on to analyse very intricate details regarding the matter and concluded that the probable reasons for fire as given by the insured was illegally discarded and thus, repudiation of the claim was liable to be set aside. The bench also stated that the findings of the technical expert, surveyor and the insurer was also not liable to be accepted as there was no evidence to prove that there were major breakdowns of the transformer 4-5 times within the 9-month period. It was also observed that there was no reason to disbelieve the evidence and hold that O.L.T.C and Buchholz relay were not in working condition, particularly when it is admitted that the Unit was run by professional and executive.

The surveyor, in the Final Survey Report, assessed Gross Loss to Rs.13163596/- and after deducting 25% for depreciation, salvage value and 5% for excess clause, he assessed Net Loss to Rs.3705334/-. There is no dispute in respect of gross loss and deduction of salvage value, but there is a dispute in respect of 25% deduction in the head of depreciation. The NCDRC bench stated that instead of 25% deduction for depreciation, only 15 % depreciation must be applied which would lead the net loss to amount to 72,57,381/- INR. The surveyor has wrongly assessed the Net loss to 37,05,334/- INR, and due to the change in net loss, the insurer was further directed to pay an amount of 35,47,381/- INR with interest @9% per annum from June 2005 till the actual payment, within a period of two months from the judgement.

Case Name : Shyam Ferro Alloys Ltd v. New India Assurnace Co. Ltd. % Ors.

Consumer Case No. 23 of 2007

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