Strict Enforcement Of Insurance Terms: NCDRC Dismisses Complaint Against National Insurance Company

The National Consumer Disputes Redressal Commission, presided over by Mr. Subhash Chandra and AVM J. Rajendra, held that insurance terms must be strictly enforced. It also stressed the importance of a surveyor's report in insurance claim cases. Brief Facts of the Case The complainant had purchased a fire insurance policy from National Insurance Co. Ltd./Insurer for stock at various places, including a godown in Goindwal. Fire erupted in the insured premises, gutting polyester raw material amounting to Rs.3.5 crore. The same was informed to the fire department, police, banks, and the insurer. Three surveyors were appointed by the insurer, but their report was not given to the complainant, nor was an opportunity given to the complainant to respond. Subsequently, the insurer repudiated the claim on the basis of unsubstantiated claims of arson. The complainant alleged that the repudiation was arbitrary, on the basis of presumptions and extraneous matters, and constituted a deficiency in service. Later on, the complainant approached the National Commission with a complaint asking for Rs. 2.88 crore as the claim amount, 24% interest p.a. from the date of claim, Rs. 10 lakh for mental distress, litigation expenses, and any other relief which the Commission finds appropriate. Contentions of National Insurance Company The insurer objected to the complaint as being frivolous and filed with malice. The insurer contended that the complainant was carrying out commercial trading and manufacturing of yarn and, therefore, was not a “consumer” as per Section 2(1)(d) of the Act. The insurer further objected on jurisdictional grounds that State Bank of India, Allahabad Bank (which had charge over the stock), and a co-insurer, Universal Sompo General Insurance Co. Ltd., were not impleaded. The complaint pertained to a fire at the complainant's godown, which was insured under a floater policy of Rs.26 crore. On being notified of the occurrence, the insurer commissioned surveyors and forensic scientists. The spot survey discovered uncooperation and physical impossibility of keeping 281 MT in the shed. It also discovered comparable stock in an adjacent linked unit. The last survey reported no electricity, freshly written stock registers, and estimated the loss at Rs.50.34 lakhs. Truth Labs eliminated accidental fire and detected accelerants such as kerosene. They determined the fire was intentional, driven by a motive for money. Handwriting analysis indicated forged documents. The insurer issued a show-cause notice based on a violation of policy conditions. The reply by the complainant failed to provide evidence or a reason. The insurer rejected the claim based on expert evidence, saying it was fraudulent and in violation of policy terms. The insurer relied on Vikram Greentech India Ltd. v. New India Assurance Co. Ltd. (2009 5 SCC 599) and Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd. (2010 10 SCC 567) in favour of the fact that insurance policies should be strictly enforced. Observations by the National Commission The National Commission noted that the insurer was justified in acting on the report of three independent experts. The forensic team and surveyors discovered kerosene use, falsified records, and inflated claims. The insurer issued a show-cause notice and accepted the complainant's response. The response did not address major points such as the presence of accelerants in the remains and the loss of original registers. The Commission had no complaint against the insurer's investigation or order. It depended on Supreme Court judgments such as Sri Venkateshwara Syndicate v. Oriental Insurance, (2009) 8 SCC 507, Khatema Fibres Ltd. v. New India Assurance Co. Ltd., 2021 SCC OnLine SC 818, and Suraj Mal Oil Mills v. United India Insurance, (2010) 10 SCC 567), which emphasize rigorous compliance with insurance conditions and significance of surveyor reports. Hence, the commission dismissed the complaint based on the above reasoning. Case Title: Roland Exports Vs. National Insurance Company Case Number: C.C. No. 218 of 2014 Click Here To Read/Download The Order

Strict Enforcement Of Insurance Terms: NCDRC Dismisses Complaint Against National Insurance Company

Ayushi Rani

Tags