NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
C. Viswanath, Presiding Member
Anjan K. Roy – Complainant
versus
M/s. Oriental Insurance Company Ltd. and Anr. – Opp. Parties
Consumer Case No.19 of 2014
Decided on 1.3.2021

IMPORTANT POINT
“Repudiation of insurance claim on ground of exclusion clause in the policy, since not expressly conveyed to the insured, amounts to deficiency in service.”

Headnote:

Consumer Protection Act, 1986 – Sections 21 and 2(1)(g) : [Consumer Protection Act, 2019 – Sections 58 and 2(11)] – Insurance Claim – Loss by Fire – Repudiation of claim – Legality – Complainant engaged in manufacturing of drugs – Took policy from opposite party to cover manufacturing unit – Fire took place due to static current produced during distillation causing massive damage to premises – Opposite Party repudiated the claim or ground of concealment of material facts before obtaining the policy – Hence this complaint – It was obligatory on Insurance Company to assess the additional risk involved and obtain fresh proposal form before, issuing the policy for both manufacturing units – After taking premium and renewing the policy, Insurance Company cannot transfer, the onus of disclosing material fact on insured – Insurance Company failed to assess the risk and issued the policy without obtaining proposal form for the respective Manufacturing Unit – Repudiation of claim on ground of exclusion clause in the policy not expressly conveyed on the insured amounts to deficiency in service and unfair trade practice – Opposite Party directed to reimburse claim of complainant – Further direction also issued.

Held: Brief facts of the case are that Complainant was engaged in manufacturing of drugs under License No. KTK/25/473/2001 issued by Drugs Controller & Licensing Authority at Units 14 & 15, KHB Industrial Area, Yelahanka, Bengaluru. The Complainant obtained from the Opposite Party, vide Policy No.421500/11/2010/151, for period 23.11.2009 to 22.11.2010 for Rs.8,77,66,000/- covering the said manufacturing units. The Policy was got renewed from time to time. On 23.02.2012 distillation was being carried out by taking 600L Toluene in the reactor and distilled Toluene was collected in the receiver. While draining, fire took place due to static current produced during distillation causing massive damage to the premises. The Complainant immediately informed the Opposite Party, vide e-mail dated 24.02.2012, who appointed Shri B. Gopalakrishnan as Preliminary Surveyor. The Opposite Party thereafter appointed M/s Flourish Insurance Surveyor and Loss Adjuster Pvt. Ltd. as final Surveyor. He visited the premises and submitted Final Survey Report, dated 22.09.2012. The Opposite Party repudiated the claim on 23.11.2012 on the ground that risk associated with erection and testing was not covered under the Policy, for which a separate Policy ought to have been taken.

It is seen from record that the Claim was repudiated on 23.11.2012 when the cause of action arose and the Complainant filed this Complaint on 27.01.2014, within two years from the cause of action within the limitation period. The Complaint was filed as per section 24A of Consumer Protection Act, 1986.

Regarding maintainability of the Complaint, it has been held by this Commission in Harsolia Motors v. National Insurance Co. Ltd. I, (2005) CPJ 27 (NC) decided on 03.12.2004 that since an Insurance Policy is taken for reimbursement or for indemnity of the loss which may be suffered on account of insured perils, the services of the insurer cannot be said to have been hired or availed for a commercial purpose. This Commission does possess the requisite jurisdiction to entertain a Consumer Complaint wherever a defect or deficiency in the services rendered by an insurer is made out. In view of the above, the Complaint is held maintainable.

It can be seen from the record that Standard Fire & Special Peril Policy was first issued by the Opposite Party in year 2009. In 2010 Unit-14 was acquired by the Complainant and details of Unit-14 were given to the Opposite Party which was to be included while renewing the Policy issued in 2009 for Unit-15. The Opposite Party renewed the Standard Fire & Special Peril Policy for Unit-14 and Unit-15. It is admitted by the Opposite Party, vide letter dated 08.02.2013, that prior information was given by the Complainant regarding Unit-14. When any new premises is acquired and machinery is brought in, it is obvious that the machinery and equipment would be installed and after a successful trial run, the plant and machinery would go into commercial production. Opposite Party in its written statement stated that “it is a practice that the Proposal Form is collected at the time of the inception in the first year. Subsequent renewal is done based on the instructions by the insured, received from time to time. Hence, it was not essential to obtain a fresh Proposal Form in writing from the Complainant. The revised/fresh proposal form is generally obtained when there are any substantial changes which alters the terms and conditions in the risk…. Complainant’s letter of 21.11.2011,which was in continuation of earlier insurance policies, was as good as the proposal form”. It is seen from the record that the Insurance Company renewed the Policy with prior knowledge of the details of machinery in premises of Unit-14 and without obtaining separate proposal form or appointing separate risk evaluator for assessing risk of Unit-14, which clearly shows that Opposite Party failed in its duty to verify and assess the risk due to addition of new premises and machinery.

Learned Counsel for the Opposite Party further stated that peril/loss was not covered by the Opposite Party as there was erection, commissioning and trial of machinery rather than normal manufacturing. He further stated that in such case two different policies are issued i.e. one covering the existing factory in operation under the Standard Fire and Special Policies and another under Erection Policy to cover the machinery under installation/commissioning. Once the commissioning and testing etc. of this part of factory is over, it is added to SFSP as enhancement of the sum insured. That erecting and testing were excluded in the Standard Fire & Special Peril Policy, was never informed to the Complainant and was made known to the Complaint for the first time only while repudiating claim of the Complainant. The onus of informing about the exclusion clause of Policy to the insured was on the Insurance Company and this onus cannot be transferred to the Insured. Hon’ble Supreme court in Bharat Watch Company vs National Insurance Co. Ltd [Civil Appeal No(S). 3912 Of 2019] observed that “The basic issue which has been canvassed on behalf of the appellant before this Court is that the conditions of exclusion under the Policy document were not handed over to the appellant by the insurer and in the absence of the appellant being made aware of the terms of the exclusion, it is not open to the insurer to rely upon the exclusionary clauses.

It was also alleged by the Complainant that the terms and conditions of the Policy were not supplied to the Complainant, while issuing and renewing the Standard Fire and Special Peril Policies. Though it was denied, the Learned Counsel for the Opposite Party failed to produce any evidence on record showing denial of the above allegation. While renewing the Policy, the Opposite Party did not seek any information relating to the status or stage of manufacturing in Unit-14 and it was only after the fire accident that the Opposite Party spoke of a separate Policy for erection, commissioning and trial. It was for the Insurance Company to mention it clearly as to what was included and what was excluded under the Insurance Policy. The provisions of the Policy must be read and interpreted in such a manner so as to give effect to the reasonable expectations of all the Parties including the insured and the beneficiaries. It is also well settled that coverage provisions should be interpreted broadly and if there is any ambiguity, the same should be resolved in favour of the insured. On the other hand, the exclusion clauses must be read narrowly. Further, even in cases where two reasonable interpretations of the terms of the Policy are possible, the Apex Court in the case of Shashi Gupta (Smt.) Vs. Life Insurance Corporation & Anr., (1995) Suppl. 1 SCC 754, held that we would accept the one which favours the Policy-holder, as the same advances the purpose for which the Policy is taken and would be in consonance with the object to be achieved for getting the lives assured. To the same effect law on the subject is succinctly stated in Skandia Insurance Co. Ltd. vs. Kokilaben Chandravadan & Ors. (1987) 2 SCC 654.

From the above observation and settled principle of law it can be concluded that when Unit-14 was acquired in 2010, it was obligatory for the Insurance Company to assess the additional risk involved and obtain fresh proposal form before issuing the Policy for both the units. After taking the premium and renewing the Policy, the Insurance Company cannot transfer the onus of disclosing material fact on insured. Once the Insurance Company itself fails to fulfill its obligations, before issuing and renewing the Policy, it cannot shy from honouring the claim of insured. It is also settled position in law that if there is any ambiguity or a term is capable of two possible interpretations, one beneficial to the insured should be accepted, consistent with the purpose for which the Policy is taken, namely, to cover the risk on the happening of a certain event. In view of the above discussion and case laws, I hold that the Insurance Company failed to assess the risk in Unit-14 and issued the Policy without obtaining proposal form for Unit-14. Repudiation of claim on grounds of exclusion not expressly conveyed to the insured, amounts to deficiency in service and unfair trade practice.

In view of the above, this Complaint is allowed. The Opposite Party is directed to reimburse the Complainant on the basis of assessment made by the second Surveyor, namely, M/s Flourish Insurance Surveyor and Loss Adjuster Pvt. Ltd, and pay a sum of Rs.29,84,006/- with interest @ 9% per annum from the date of filing of this Complaint to date of this order. The Opposite Party is directed to pay the above referred amounts to the Complainant within a period of eight weeks from the date of receipt of a copy of this order. (Paras 8 to 15)

Result: Complaint Allowed.