NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
V.K.Jain, Presiding Member, Dr. B.C. Gupta, Member
Shiv-Vani Oil & Gas Exploration Services Ltd., Through Mr. B. G. Daga Authorized Representative —Complainant
versus
The Chairman & Managing Director, United India Insurance Co. Ltd. & Ors. —Opp. Parties
Consumer Complaint No. 96 of 2007
Decided on 19.1.2015

IMPORTANT POINT
Rate of depreciation to be applied while computing loss to insured, cannot be left to subjective discretion of surveyor.

Headnote:(A) Consumer Protection Act, 1986—Sections 15, 17, 19 and 21—Insurance—Marine Hull Comprehensive Package Policy—Loss due to terrorist activity—In absence of any rules/guidelines framed either by IRDA or by Insurance Company itself, depreciation should have been applied at rates prescribed in Income Tax Act and Rules—Rate of deprecation to be applied while computing loss to the insured, cannot be left to subjective discretion of surveyor, unguided by any guidelines or rules or regulations—If rate of depreciation to be applied in respect of a particular part/machinery is left to subjective discretion of surveyor that may result in surveyor becoming arbitrary and autocratic—If IRDA has not framed any rules/guidelines on this subject, Insurance Company can prescribe its own rules of depreciation and make them a part of Insurance policy itself so as to bind insured—But, if it is not done, rates of depreciation have to be based on some objective norms which in absence of any other norms can only be rules of depreciation contained in Income Tax Act and Rules, in respect of machinery/component in question.

       Held: As regards deductions made by the surveyor under the heading ‘excess’, the learned counsel for the Insurance Company could not draw our attention to any clause in the Insurance Policies allowing such a deduction. The Insurance Policies which are available in our paper book contain no provision for any deduction in a case of loss or damage due to terrorists attack. As per the terms of the policy, the Insurance Company had agreed to indemnify the insured for loss, destruction or damage by fire, riots, strike, terrorists activity, theft or accident etc. caused any time during the period of the Insurance. Therefore, in the absence of the provision of deductions on account of terrorists acts, the surveyor was not justified in making deductions which he made after computing the loss suffered by the complainant Company. (Para 7)

       (B) Consumer Protection Act, 1986—Sections 15, 17, 19 and 21—Insurance—As per terms of policy, Insurance Company had agreed to indemnify insured for loss, destruction or damage by fire, riots, strike, terrorists activity, theft or accident etc. caused any time during period of insurance—In absence of provision of deductions on account of terrorists acts, surveyor was not justified in making deductions which he made after computing loss suffered by complainant Company—Insurance Company directed to re-compute loss to complainant Company—9% interest also awarded.

       Held: Since it is not known as to what are the rates of depreciation prescribed in the Income Tax Act and Rules framed thereunder in respect of the machinery/components etc. stolen/damage during the incidents of 21.11.2003 and 23.11.2003, the matter needs to be remitted back to the Insurance Company for re-computing the loss to the complainant Company, after applying the rates of depreciation prescribed under the Income Tax Act and Rules framed thereunder, as against the rates of depreciation applied by the surveyor. We direct the Insurance Company to re-compute the loss to the complainant Company accordingly within a period of 6 weeks from today.

       Since the Insurance Company, instead of paying the claim within a reasonable time, chose to pay the same only during pendency of the complainant before this Commission, we also direct the said Company to pay interest to the complainant at the rate of 9% per annum w.e.f. 6 months of the date of lodging of the complaint till the date the amount in question was paid by the Insurance Company to the complainant during pendency of this complaint. If any additional amount becomes payable to the complainant consequent to re-computing of the loss in the light of this order, the Insurance Company shall pay interest on that amount at the rate of 9% per annum w.e.f. 6 months of the date of lodging of the claim till the date the aforesaid payment is made. This order applies in respect of both the claims i.e. the claim subject matter of the survey report dated 27.05.2006 as well as the claim which was subject matter of the second survey report dated 01.06.2006. One copy of this order be also sent to the IRDA for information and considering framing appropriate guidelines as regards application of depreciation in such matters. (Paras 8 and 9)

       Result: Consumer Complaint allowed.