Concealment Of Material Facts By Insurance Company, NCDRC Imposes Costs

The bench noted that, there is clear concealment of material fact on the part of the Insurance Company. Repudiation of the insurance claim on the ground that the Complainant filed a fraudulent claim was certainly not justified.

The bench observed that, the Complainant had not carried out any safety measures against the fire such as fire extinguisher piped water arrangement etc. For this reason, the State Commission found contributory negligence on the part of the Complainant.

In this case, the complainant is a proprietorship firm engaged in the business of plastic reprocessing. Appellant (Opposite Party No.1) is National Insurance Company. Respondent No.2 (Opposite Party No.2) is Ahmednagar Merchant Co-op Bank. The Complainant took Standard Fire & Special Perils Insurance Policy for Rs.29 lakhs. On 30.07.2004, the stock of plastic kept in the factory premises caught fire and the fire spread rapidly. The Insurance Company deputed Mr. Thombre as Surveyor, who inspected the factory premises. The Insurance Company repudiated the claim of the Complainant on the ground that it was a fraudulent claim. The Complainant approached the Insurance Ombudsman. The Insurance Ombudsman dismissed the claim. Aggrieved by dismissal of the claim, the Complainant filed Complaint before the State Commission and prayed the opposite party to pay a sum of Rs. 26,00,000 with 18% interest. The State Commission partly allowed the appeal and directed the opposite parties to pay Rs.13,30,000/- with 9% interest from the date of repudiation of the claim.

Aggrieved by the decision of State Commission ,Maharashtra the appellant (Insurance Company) filed an appeal before the National Commission under Section 19 of the Consumer Protection Act, 1986.

Before the National Commission, the appellant, submitted that the State Commission failed to appreciate that the claim filed by the Complainant was fraudulent. The State Commission failed to appreciate the fact that the claim was covered under exclusion clause 8 of the Insurance Policy that in case of fraudulent claim, the Insurance Company would not be liable to honour it. It was submitted that report of the Maharashtra State Electricity Board showed that on 30.07.2004, there was no explosion in the transformer and there was no fire in the Complainant factory premises.

The respondent (complainant) submitted that the Appellant had not filed any document to establish that the claim filed by the Complainant was fraudulent. The Opposite Party totally ignored the investigation report and accepted the Surveyor's Report. It was further submitted that the Surveyor had not mentioned the cause of fire. The Survey Report regarding cause of action was, therefore, not acceptable. The Opposite Party on the basis of the Survey Report observed that the incident of cause of fire was concocted and repudiated the claim, which was not justified. There was, thus, no violation of clause 8 of the Insurance Policy.

Analysis:

The issue for consideration before the bench was whether the Insurance Company is liable for the loss suffered by the complainant or not.

The bench noted that, the Complainant had taken an Insurance Policy from Opposite Party No.1. On the date of the incident, the Policy was effective. The incident of fire is also not disputed by Opposite Party No.1. The cause of fire is disputed by the Insurance Company.

The bench further noted that, as per the Surveyor, the exact cause of fire could not be ascertained. The proximate cause was discussed separately elsewhere. The Insurance Company filed a copy of the Investigation Report by the same Surveyor where the Surveyor had specifically observed that the fire was accidental.

The bench stated that, the aforesaid report is a vital document on which the entire case rests. It appears that the Insurance Company deliberately tried to conceal the separate report submitted by the Surveyor regarding cause of fire and did not file the same along with the Appeal. The same was filed only on 06.07.2017, after direction of this Commission dated 06.06.2017. There is, thus, clear concealment of material fact on the part of the Insurance Company. Repudiation of the insurance claim on the ground that the Complainant filed a fraudulent claim was certainly not justified.

The bench further stated that, the State Commission, thus, assessed the total loss at Rs.19,30,000/-. The Surveyor assessed the cost of salvage at Rs.2,60,000/-. The State Commission, therefore, deducted the salvage cost of Rs.2,60,000/ from the net loss and assessed the loss at Rs.16,70,000/-.

The bench noted that, The State Commission observed that the Complainant had not carried out any safety measures against the fire such as fire extinguisher piped water arrangement etc. For this reason, the State Commission found contributory negligence on the part of the Complainant and made 20% deduction on the amount of Rs.16,70,000/- and finally assessed the loss at Rs.13,30,000/-. The bench agreed with the findings of the State Commission and observed that there is concealment of material fact on the part of the Appellant.

The bench imposed a cost of Rs. 50,000/- on the Appellant (Insurance Company) and directed to pay within two months from the date of the order.

Case Name: National Insurance Co. Ltd. v. M/S. Nitin Industries & Anr.

Case No.: FIRST APPEAL NO. 207 OF 2012

Corum: Justice C. Viswanath, Presiding Member and Ram Surat Ram Maurya, Member

Decided on: 24^th May, 2022

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