2023 Supreme(SC) 1177

SUPREME COURT OF INDIA
HRISHIKESH ROY, SANJAY KAROL, JJ.
New India Assurance Co. Ltd. & Ors. - Appellants
Versus
M/s. Mudit Roadways - Respondent
Civil Appeal No.339 of 2023
Decided on : 24-11-2023

IMPORTANT POINTS
(1) Insurance – Standard Fire and Special Perils Policy and Customs Duty Package Policy – Precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided claimant is not instigator of fire.
(2) Value of Surveyor’s report – Insurer has discretion to settle claim for a different amount, than what is assessed by Surveyor.
(3) Insurance contract – Insurer assumes a fiduciary duty to act in good faith and honour their commitment – This responsibility becomes particularly pronounced when insured, in their actions, have not been negligent.

Headnote:

(A) Consumer Protection Act, 2019 – Section 67 – Public Warehouse Licensing Regulations, 2016 – Customs Act, 1962 – Sections 22 and 23 – Insurance – Standard Fire and Special Perils Policy and Customs Duty Package Policy – Fire in insured warehouse – Compensation of Rs.6,57,55,155/- alongwith 9% interest awarded by NCDRC – Insurer cannot introduce additional reasoning beyond those detailed in their letter, to justify repudiation – Essential repair work on rooftop by itself, cannot be reasonably construed to be an alteration that would increase risk of loss or damage – Reports furnished by claimant which include assessments by government departments and two independent surveyors, have however consistently identified cause of fire as a short-circuit – Reports furnished by claimants being consistent and logical are more acceptable in ascertaining true cause of fire – Precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided claimant is not instigator of fire – Insurance company’s obligation to insured is of much greater import – Privileges enshrined in Sections 22 and 23 of Customs Act, pertaining to abetment and remission, extend exclusively to those classified as 'importers' of insured goods – Reports suggesting electrical short circuit as trigger for warehouse fire, is found to fit in with attendant circumstances – It is a case of wrongful repudiation by appellants – Appeal dismissed favouring insured. (Paras 33, 37, 48, 50, 55, 56 and 59)

(B) Insurance Act, 1938 – Section 64(UM)4 – Value of Surveyor’s report – Claims above Rs. 20,000/- must be initially assessed by an approved Surveyor – Insurer has discretion to settle claim for a different amount, than what is assessed by Surveyor – Surveyor’s report cannot be considered a sacred document and contrary evidence including an investigation report, is subject to rebuttal. (Paras 43 and 45)

(C) Insurance Act, 1938 – Section 45 – Insurance contract – In the realm of risk and uncertainty, individuals and organisations seek solace in bastion of insurance – a covenant forged on bedrock of trust – Trust serves as cornerstone, forming essence of insurer-insured relationship – Insurance is governed by doctrine of uberrima fidei – there must be complete good faith on part of insured – Heart and soul of an insurance contract lies in protection it accords to those who wish to be insured by it – This understanding encapsulates foundational belief that insurance accords protection and indemnification, preserving sanctity of trust within its clauses – Effectively, insurer assumes a fiduciary duty to act in good faith and honour their commitment – This responsibility becomes particularly pronounced when insured, in their actions, have not been negligent – In light of vital role that trust plays in insurance contracts, it is important to ensure that insurer adequately fulfils duty that has been cast on it, by virtue of such covenant. (Para 57)

Facts of the case:

Present appeal challenges 10.8.2022 order of National Consumer Disputes Redressal Commission, which partially allowed consumer complaint directing Insurance Company to pay Rs.6,57,55,155/- for a fire insurance claim with 9% interest from claim denial date within 8 weeks, or face 12% interest beyond stipulated 8 weeks.

Findings of Court:

Even while dismissing appeal, to avoid any confusion, customs duty component of claim should, in the given event, be discharged directly to Customs Department. All other legal consequences will follow on upholding claim of insured against appellants. It is ordered accordingly.

Result : Appeal dismissed.