Gold Heist: Karnataka State Commission Orders Insurance Company To Compensate 80 Lakhs To A Jewelry Store

Brief Facts:

Chemmanur Jewellery (“Complainant”), a prominent retail trader of gold and silver articles, had taken out an insurance policy with The New India Assurance Co. Ltd. (“Insurance Company”) to insure its showroom for the period from March 10, 2011, to March 09, 2012. The insurance coverage was substantial, amounting to a sum of Rs. 9 Crores. Tragically, on December 07, 2011, certain miscreants targeted the showroom and carried out a robbery, stealing a significant quantity of gold and silver articles and assaulting the staff. As soon as the incident unfolded, the Complainant promptly reported the matter to both the police and the Insurance Company.

In the aftermath of the robbery, the Complainant filed a claim for the actual loss sustained, valuing it at Rs. 79,86,728/-. However, upon investigating the claim, the Insurance Company assessed the loss at a considerably lower amount of Rs. 48,86,947/- and refused to indemnify the Complainant beyond this reduced sum. The Complainant then filed a complaint in the Karnataka State Consumer Disputes Redressal Commission (“State Commission”) to direct the Insurance Company to pay actual losses amounting to Rs.79,86,728/- along with interest and to pay Rs.10,00,000/- as compensation for the suffered losses and mental agony. The Complainant contended that the Insurance Company wrongfully included the gold present with Chemmanur Impex Limited, another entity associated with the Complainant, to compute the Insurance amount. ‘Chemmanur Impex Limited’ and ‘Chemmanur Jewellery’ were distinct and separate. Therefore, the gold under the control of Chemmanur Impex should not be considered while assessing the insurance coverage for the showroom.

On the other hand, the Insurance Company put forth its contention, stating that the complainant's policy covered various risks and that they had, in fact, increased the insurance coverage from Rs. 6 Crores to Rs. 9 Crores when the Complainant moved to a larger premises. The insurer claimed that the loss was appropriately assessed at Rs. 48,86,947/-, representing 75% of the total liability under the policy. The remaining 25% would be paid upon production of the final investigation report.

Decision of the Court:

The State Commission carefully examined the Insurance Company’s assertion of underinsurance. In doing so, the State Commission relied on the precedents set by two crucial cases: G.N. Halmarking & Refinery Pvt. Ltd. v. National Insurance Company Limited & anr. FA/1439/2014, and Sikka Papers Limited v. National Insurance Co. Ltd. & others AIR 2009 Supreme Court 2834.

In G.N. Halmarking and Refinery Pvt. Ltd. v. National Insurance Company Limited & anr., the National Consumer Disputes Redressal Commission (“NCDRC”) had directed the insurance company to settle the claim of the complainant, along with interest at 9% p.a. from the date of repudiation of the claim till realization. The Commission had held that the incident of theft came under the deficiency of service, and the insurer was obligated to indemnify the loss sustained by the complainant in its entirety, as per the terms and conditions of the policy. In Sikka Papers Limited v. National Insurance Co. Ltd. & others, the Supreme Court acknowledged that there was an element of underinsurance in the complainant's policy. As a result, the surveyor applied a pro-rata formula and deducted 25.71% from the loss assessed. This deduction was deemed permissible in that particular case, considering the underinsurance aspect.

Drawing on the principles established in these cases, the State Commission proceeded to address the dispute at hand. The State Commission, after a thorough examination of the evidence presented, found the Insurance Company’s contention of underinsurance in the complainant’s case to be "unacceptable." The Insurance Company failed to substantiate its claim with convincing evidence and, to make matters worse, their contention was brushed aside by the addendum report submitted by the authorized surveyor.

The State Commission concluded that the Insurance Company had rendered a deficiency of service in the matter, and therefore, it ordered the Insurance Company to compensate the Complainant with a sum of Rs. 78,72,015/- for the actual loss suffered due to the burglary at their showroom. Additionally, taking into account the Insurance Company’s inordinate delay in settling the claim, the Commission referred to the case of Kali Ram Goyal v. Union Bank of India & anr. II (2013) CPJ 383 (NC) as a guiding precedent for awarding additional compensation.

In light of the prolonged claim settlement process, the court decided that the Insurance Company was also liable to compensate the complainant for the escalated price of gold from December 16, 2011, until July 13, 2023, when the case was eventually settled. Apart from the compensation for the actual loss, the Insurance Company was directed to pay an amount of Rs. 1,00,000/- to the Complainant as reparation for the mental agony and inconvenience caused. Furthermore, the Insurance Company was ordered to bear the litigation costs and pay Rs. 50,000/- within 45 days from the date of the settlement, as a means to provide fair restitution for the long-drawn legal battle.

Case: Chemmanur Jewellery vs The New India Assurance Co. Ltd.

Case No.: CC/208/2013

Advocate for the Appellant: B.S. Gnana Prakash

Advocate for the Respondent: Mr. C.R. Ravishankar, Adv.

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