Delay In Furnishing Insurance Coverage Documents Without Reasons Is 'Deficiency In Service': NCDRC

The National Commission Disputes Redressal Commission (NCDRC) bench comprising Subhash Chandra, Presiding member and AVM J. Rajendra AVSM, Member has held that delay in providing the complete policy contract details including primary insurance coverage documents without any reasons constitutes 'deficiency in service'. It was held that it exposes the policyholder to uncertainty with respect to risk cover. Brief facts: The complainants placed their consignments of 60,543 bags and 41,880 bags of potatoes in cold storage and got it insured by way of a 'Deterioration of Stock Insurance Policy' from New India Assurance Company ltd. ('Insurance company').The insurance coverage of the policy was Rs. 90 lakhs. The policy was valid from 15.04.2008 to 14.11.2008 and a premium of Rs. 50,400 was paid in full by the complainant. On 10.09.2008, a short circuit was detected in the cold storage facility. On 19.09.2008 there was a water pump failure and a severe storm resulted in extended power outage which persisted until 22.09.2008. Due to this, the required temperature in the facility could not be maintained resulting in deterioration of 31,609 bags of potatoes valued at Rs.27,81,592. The insurance cover note was not issued to the complainant by the insurance company till the date of the incident. A claim was immediately filed by the complainant with the insurance company along with all documents. Despite a survey being conducted, the claim was rejected by the Insurance company without specifying any reasons. After multiple requests, the insurance company finally disclosed the reasons pursuant to which a complaint was filed by the complainant with State Commission Lucknow, Uttar Pradesh. The insurance company in its reply stated that as per survey report there was supply of electricity for 2.5 hours on 21.09.2008 and 12 hours on 22.09.2008 followed by regular daily supply. Hence, there are inconsistencies with respect to power outage in the cold storage facility. It was further stated that the damage was not on account of any machinery incident and the loss occurred because of multiple deficiencies in storage practices. It was further stated that the potatoes were not stored properly in the chambers of cold storage. The Insurance company claimed that the loss happened due to improper storage practices, excess storage beyond capacity and acts of negligence by the complainant. The state commission noted that the insurance cover note was issued after the date of the incident and therefore the terms and conditions of the policy were not binding on the complainant. The state commission allowed the complaint partly and directed the insurance company to pay Rs. 27,77,483/- on account of loss suffered due to potato spoilage. A sum of Rs. 50,000 was also ordered to be paid for mental and physical agony. The decision of the state commission was challenged by the insurance company before the NCDRC. Submissions of the Insurance Company: The company submitted that the claim is non-payable due to clear breach of terms and conditions of the stock policy. The company repeated its arguments that the loss was due to improper storage, insufficient air circulation, non-uniform temperature distribution and subsequent temperature rise caused by electrical failure. It was contended that even if the complainant's claim is payable, then as per terms and conditions of the policy for Deterioration of Stock, the liability of the insurance company would be limited to Rs. 12,62,851, as brought out in the Survey report. Submissions of the complainant: The complainant submitted that the loss occurred due to prolonged power outage at the cold storage facility. It was submitted that despite providing all relevant documents, the claim was repudiated by the insurance company and the reasons were provided after much delay. It was the specific contention of the complainant that all operational records of the cold storage were properly maintained and the justifications provided by the insurance company for denial of claim are false. Observations of the Commission: The bench observed that there was no insurance cover document provided by the insurance company prior to the incident and it was issued only on 24.10.2008. It was further observed that the Insurance company failed to provide the complete contract details to the complainant which constitutes 'deficiency in service' since it exposes the complainant to uncertainty with respect to risk cover. However, the bench also noted that though there was deficiency in service with respect to supply of policy terms, the parties should adhere to the fundamental terms of the contract which were agreed upon at the time of preferring the proposal and payment of premium. Since the claim of the complainant was asserted under the policy, the loss was also determined as per the terms of the policy. Therefore, the order ...

Delay In Furnishing Insurance Coverage Documents Without Reasons Is 'Deficiency In Service': NCDRC

Aakanksha Bajoria

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