Tata AIG Can't Repudiate Fire Insurance Claims By Treating Standard Kashmiri Buildings As 'Kutcha Constructions': J&K Consumer Commission
The Jammu & Kashmir State Consumer Disputes Redressal Commission, Srinagar, comprising President (O) Smt. Nighat Sultana and Member Mr. Maheep Gupta, has held Tata AIG General Insurance Co. Ltd. guilty of deficiency in service for repudiating fire insurance claims on the ground that the insured premises were "kutcha constructions". Observing that wooden plank roofs covered with CGI sheets are the standard mode of construction in Kashmir owing to its topography and climate, the Commission held that the insurer could not rely upon an unreasonable policy warranty to repudiate the claims.
Facts
The complaints were filed by M/s Lone Enterprises, M/s Mudasir Enterprises and M/s Shoaib Enterprises, whose insured walnut kernel stocks were destroyed in a fire. Tata AIG repudiated the claims through identical letters dated April 26, 2019, stating that the insured premises fell within the policy exclusion relating to "kutcha construction" because the roofs consisted of wooden planks covered with CGI sheets. The complainants contended that while the roofs were constructed in accordance with the standard practice followed across Kashmir, the walls were built with burnt bricks and cement and therefore could not be classified as kutcha structures.
The insurer defended the repudiation on the ground that there had been a breach of the express policy warranty relating to kutcha construction. During final arguments, it additionally sought to rely upon an investigator's report suggesting that the fire might have been deliberately caused to obtain a fraudulent insurance claim. The surveyor (Opposite Party No. 3) was proceeded ex parte.
Observations
The Commission rejected the insurer's reliance on the allegation of a self-inflicted fire, observing that the repudiation letters were based solely on breach of warranty and did not refer to fraud. It held that an insurer cannot justify repudiation by raising fresh grounds not mentioned in the repudiation letter or pleaded in the written statement. It also noted that the investigator had merely stated that the possibility of a malicious act "could not be ruled out", while the survey report itself described the fire as accidental.
On the policy warranty, the Commission observed that although courts cannot rewrite insurance contracts, they can examine whether policy conditions are reasonable. It noted that wooden plank roofs covered with CGI sheets are the standard mode of construction in Kashmir due to heavy snowfall and held that the insurer's "kutcha construction" warranty was "highly unwarranted". Consequently, it held that Tata AIG could not rely on such an unreasonable warranty to repudiate the claims and was guilty of deficiency in service.
The Commission further held that the complainants had an insurable interest in the damaged stocks despite outstanding payments to suppliers, observing that ownership passes to the buyer upon delivery irrespective of whether the goods are purchased on cash or credit. It found the surveyor's deductions on the ground of lack of insurable interest to be unjustified and observed that, at best, the claims could have been treated as non-standard due to imperfect maintenance of accounts.
Allowing the complaints, the Commission directed Tata AIG General Insurance Co. Ltd. to pay ₹30,96,667 to M/s Lone Enterprises, ₹34,69,798 to M/s Mudasir Enterprises and ₹30,97,341 to M/s Shoaib Enterprises. The amounts comprise the net adjusted loss as determined by the Commission, compensation for opportunity loss caused by delayed settlement calculated at 8% from the date of repudiation till the date of the order, and ₹25,000 towards litigation expenses in each case. The insurer has been directed to pay the amounts within 30 days, failing which it will be liable to pay interest at 6% per annum on the entire awarded amount until payment.
Case Title: M/s Lone Enterprises & Ors. v. Tata AIG General Insurance Co. Ltd. & Ors. (C.C. Nos. 33, 34 & 36 of 2019)
Coram: Smt. Nighat Sultana, President (O) and Mr. Maheep Gupta, Member.
Appearance: Adv. N.A. Shalla for the complainants;
Adv. T.A. Mallik for Opposite Party No. 1 (Tata AIG General Insurance Co. Ltd.);
Adv. T.P. Singh for Opposite Party No. 2 (Axis Bank Ltd)