NCDRC Enhances Compensation Against New India Assurance For Faulty Claim Assessment

The Commission partly allowed the appeal filed by M/s Khanna Polyrib Pvt. Ltd. and enhanced the compensation by directing the insurer to pay an additional sum of ₹1,57,804, with 8% interest from the date of complaint till payment.

Facts of the Case

The complainant / appellant, Khanna Polyrib Pvt. Ltd., had taken an insurance policy from New India Assurance Company for a total insured amount of Rs.1,10,52,000, covering its building, machinery, and generator.

On 17 September 2005, a fire broke out on the premises, causing major damage to the extrusion plant. The complainant submitted a claim of Rs.38.85 lakh to the insurer.

The insurer appointed a surveyor, who assessed the net loss at Rs.8,48,700 after deducting depreciation and salvage value. The complainant objected to this report because the generator was excluded from the assessment.

In response, the insurer appointed an investigator, who reduced the depreciation rate from 10% to 7.5% and reassessed the loss at Rs.10,65,478. The insurer offered to settle the claim for this amount, but the complainant refused and filed a complaint before the State Consumer Disputes Redressal Commission, alleging deficiency in service and demanding Rs.23,08,688.25.

The State Commission partly allowed the complaint and fixed the compensation at Rs.18,17,399, based on the surveyor's gross estimate. Both parties filed appeals; the complainant seeking a higher amount and the insurer challenging its liability.

.Arguments of The Parties

The appellant(complainant) argued that the surveyor's report did not properly assess the actual damage. He submitted that the loss of the generator, though specifically covered under the insurance policy, was not assessed at all in the surveyor's report. He further argued that the depreciation rate applied was incorrect, and that the renewed policy already reflected depreciation in the insured value. Therefore, applying additional depreciation was not justified and deficient in providing service.

The respondent New India Assurance Company submitted that the insurer had accepted liability in good faith by offering ₹10,65,478 based on the investigator's assessment, which the complainant later accepted under interim orders. The insurer justified the depreciation as reasonable, considering the machinery's age and prior use, and argued that the State Commission's award of ₹18,17,399 was excessive and beyond the assessed loss.

Observation By the Commission

The Commission dismissed the claim for the generator, observing that such a claim was not made in the original complaint or reflected in the surveyor's report, and therefore could not be sustained.

The Commission found merit in the complainant's argument concerning the exclusion of spares such as welding rods and embossing rolls, holding that there was no justification for excluding these items merely because they were lying near the machines when the fire occurred. The Commission directed that their values, Rs. 12,487 and Rs. 2,40,000 respectively, be included in the assessed loss.

In determining the rate of depreciation, the Commission noted that the plant and machinery was purchased in 2001 and the loss occurred in 2005, with a usage period of almost five years, and found that a certain amount of depreciation was expected. Furthermore, the Commission observed that the insurer gave no reason for adopting the reduced depreciation rate of 7.5% suggested by the investigator instead of the 10% rate applied by the surveyor.

The Commission also clarified that the higher insured value in the renewed policy of Rs. 88,02,000 for the plant and machinery did not represent an increased purchase value but only reflected the amount insured. The Commission allowed the investigator's 7.5% rate, resulting in a total depreciation of 37.5% for the purpose of final loss calculation.

The Commission partly allowed the appellant's appeal and modified the earlier award, increasing the compensation to ₹18,17,399. It observed that not granting interest in cases of delayed payment amounts to injustice.

The Commission confirmed the interim amount (₹10,65,478) already paid, which would carry 8% interest from the date of filing of the complaint until the date of payment (29.05.2013).Additionally, it directed the insurer to pay the balance amount of ₹1,57,804, representing the value of welding rods and embossing rolls after applying 37.5% depreciation, along with 8% interest from the date of the complaint until the actual date of payment.The balance amount was to be paid within two months, with any default attracting 10% interest. Both appeals were disposed of on these terms.

Case Title: M/s Khanna Polyrib Pvt. Ltd. vs New India Assurance Co. Ltd. & Anr. FIRST APPEAL NO. 272 OF 2015

Click Here To Read/Download The Order