IMPORTANT POINT
Contract of insurance is a contract of indemnification and not for any enrichment.

ORDER

A.P. Sahi, President—CC/78/2012 was filed by M/s. Sunbright Exporters along with the Consumer Protection Council, which is an organisation working for the cause of consumers, in relation to the repudiation of the claim for loss suffered by M/s. Sunbright Exporters during the floods on 24/27.10.2005. The stocks damaged were leather garments traded by the complainant, M/s. Sunbright Exporters, which was secured under a risk coverage of First Appeal No.570 of 2015 the insurance policy extended by M/s. United India Insurance Co. Ltd. for the period 22.11.2004 to 21.11.2005.

2. The claim was reported by the complainant and a surveyor was appointed. The survey report dated 05.04.2008 is on record and paragraph 16.1.6 to 17.1.3 of the report concludes that the claimant had been unable to establish any liability arising out of the alleged loss. It was also held that the insured had not suffered any financial loss as the goods were of no commercial value qualifying for any liability. Paragraphs 16.1.6 to 17.1.3 are extracted herein under:—

“16.1.6 It has been shown clearly the goods were made-to-order, as the Insured operate a Jobbing industry. Of orders are cancelled and/or rejected by the particular customers, it is extremely difficult or impossible to locate alternate buyers in the overseas market, for reasons of specifications and preferences in terms of design, style, size, colour, material, other accessories, and cost. Virtually no local/domestic market exists or fashion goods such as leather garments. Therefore, it can be held that the goods were not marketable, much prior to the occurrence, and hence had no market value.

16.1.7 As already mentioned, the principle of inventory valuation cost or market price, whichever is less is time tested and universally adopted. Irrespective of the cost Incurred, however, high it is, if the goods have a low or no market value, the valuation will be on such basis and not on cost. Old, ageing and obsolete inventory, lacking customers and markets, and therefore, having no marketability, would be considered value-less/worthless.The bank’s inspection and appraisal reports also clearly bring about in several places the issues of cancellation of orders, ageing of stocks, unrealistic valuation, etc. These 4 clearly establish that these were issues much before the occurrence.

16.1.9 It can, therefore, be concluded, based on available information, that the Insured had old, non-moving, ageing, and obsolete Inventory, which had no commercial or economic value, long since abandoned by them, as conclusively found by us.

17.0.0 Conclusion on Insurer’s Liability:—

17.1.1 From all available reports and analysis, it appears that the Insured had fallen on bad times and were saddled with obsolete and non-moving stocks, due to customer order cancellations, rejections, spoilage, etc. They appear to have lost the value and marketability much before the occurrence.

17.1.2 As detailed under paragraphs 12 to 16 above, it has been clearly detailed and established chat the affected stocks were already old and obsolete stocks and had! not suffered any diminution in value on account of the floods. In Comtec’s opinion, it has conclusively been established that the Insured has not suffered any economic loss qualifying for admission of liability under the contract of insurance.

17.1.3 Therefore, the Insurer have no liability in the matter, and it may \ in order to repudiate any liability under the policy.”

3. Acting on the strength of the aforesaid report, the Insurance Company repudiated the claim vide undated letter, which is extracted herein under:—

“M/s. Sunbright Exporters,

510, 6th Main Road,

MKB nagar, Vyasarapadi,

Chennai - 600 0039

Dear Sirs,

Re Flood Claim under Fire Policy No.010303/11/04/11/OOOOQ367-DOL 27.10.2005

We invite your kind attention to the flood claim preferred by you on us in respect of our fire policy No.010303/11/04/11/00000367 for the period from 22.11.2004 to 21.11.2005 towards damage alleged t