Limitation Period Under Policy Is Shorter Than Statutory Period For Filing Complaint, Unenforceable And Void: NCDRC Holds Oriental Insurance Liable For Deficiency In Service

The National Consumer Disputes Redressal Commission, presided by Subhash Chandra and Sadhna Shanker(member), held that the Consumer Protection Act 1986 provides a two-year limitation period for filing a complaint, and the insurer cannot reduce it through a policy clause. Brief Facts of the Case The complainant established a husk and coal-based Power Plant, which commenced commercial production of power and, as required by law, installed an electro-static precipitator (ESP) as a pollution control measure. The company obtained a Machinery Breakdown Insurance Policy covering 13 items, including the ESP, and paid a premium of Rs. 1,70,335 from Oriental Insurance/insurer. Although the policy schedule and a list of covered items were issued, the terms and conditions were not provided. Subsequently, the ESP broke down and stopped functioning, and the complainant promptly informed the insurer and the ESP manufacturer. An initial survey revealed extensive damage to the first and second fields of the ESP, necessitating a 2-3 month replacement period. The complainant received quotations for the necessary materials and planned to restart the Power Plant using the third field of the ESP to avoid a complete shutdown. The insurer provided a claim form, which was submitted along with necessary documents, claiming Rs. 67,83,000 under the insurance policy. The complainant received the replacement components and informed the insurer of the planned shutdown for repairs. After completing the replacements, the insurer was notified, and a final survey was conducted by a surveyor, whose report was not furnished to the complainant despite repeated requests. The surveyor obtained the complainant's signatures on several documents and assured the claim would be settled soon. However, the insurer eventually repudiated the claim, stating that the loss fell under the policy exclusion clause. The complainant alleged that the exclusion clause or policy terms and conditions were never provided, making the insurer's repudiation of the claim unfair. The complainant filed a complaint in the State Commission, which dismissed the complaint. Following this, the complainant appealed to the National Commission. Contentions of the Insurer The insurer contested the complaint, raising a preliminary objection that the complainant company was not competent to file the complaint and was barred by limitation. The insurer asserted that the complete policy document, including the policy schedule and terms and conditions, had been forwarded to the complainant company. The surveyor found that the damage was due to gradual wearing, wasting, and corroding of the gas distribution plates, electrode plates, tadpoles, etc., with no signs of fire or electrical melting. The probable causes of the corrosion and erosion included low temperature, excessive sulfur trioxide gas, failure of the hopper heater, and moisture in the ESP. It was claimed that the erosion and corrosion in the bottom portion of the gas distribution plate caused improper and uneven gas distribution, concentrating flue gas and smoke flow in the bottom portions of the ESP, thus causing further corrosion and erosion. The insurer argued that this loss fell under the policy exclusion. Additionally, the insured minimized the damage to the electrodes, plates, and rigitrodes after repairs and fabrication of the inlet gas distribution plate. The insurer noted inconsistencies in the complainant's statements, noting that the claim form initially mentioned damage to two fields but later included a 20% damage to the third field, indicating gradual wear and tear rather than damage from a specific event. Thus, the insurer argued that the damage could not be attributed to the reported event and the breakdown did not necessitate the replacement of the claimed items. Observations by the Commission The Commission observed that the matter of limitation needed to be addressed first since the State Commission held that clause 4.2 of the Machinery Breakdown Policy required forfeiture of all benefits if no action or suit was commenced within three months. The commission relied on the decision in the case of Grasim Industries Limited vs. State of Kerala (2018), where it was held that any agreement or clause specifying a limitation period shorter than the statutorily available period is unenforceable and void. The Consumer Protection Act 1986 stipulates a two-year limitation period, which the insurer cannot reduce through a policy clause. It was further observed that it was undisputed that the complainant had a “Machinery Breakdown Insurance Policy” for the relevant period. The final surveyor's report recommended that the loss fell under exclusion 7 of the policy, but clause 7 pertained to a different policy, the “Machinery Insurance Policy.” The commission noted there was no clarity regarding which policy the claim had been repudiated...

Limitation Period Under Policy Is Shorter Than Statutory Period For Filing Complaint, Unenforceable And Void: NCDRC Holds Oriental Insurance Liable For Deficiency In Service

Ayushi Rani

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