Misrepresentation in insurance discharge vouchers invalidates settlements; insurers must adhere to coverage terms without unjustly citing underinsurance.

JUDGMENT

Air Vice Marshal J Rajendra AVSM VSM (Retd)

1. The Appellant filed the instant First Appeal against the Order dated 29.06.2015 of the State Consumer Disputes Redressal Commission, Chhattisgarh (“State Commission”) in Consumer Complaint No. 14/15, wherein the State Commission dismissed the Complaint.

2. As per Registry report, there is 13 days delay in filing this Appeal. For reasons stated in IA No.5538/2015 the delay is condoned.

3. For convenience, the parties in the present matter are being referred to as per position held in the Consumer Complaint.

4. Brief facts of the case, as per the complainant, are that the OPs issued a Standard Fire and Special Perils Insurance Policy No. 191300/11/2014/221 in favour of the complainant. The said policy remained in force from 12.10.2013 to 11.10.2014 and covered various risks, including a specific coverage of Rs. 9,50,00,000/- for loss due to spontaneous combustion of sponge iron, for which an additional premium of Rs.47,500 was paid. In the morning of 04.11.2013, flames were observed emanating from the sponge iron heap at the factory of the complainant by the Production Manager, Mr. Sharad Diwan, who immediately reported the same to Mr. Agrawal. Despite attempts to control the fire, the loss could not be averted. The incident was reported to OP-2 on 06.11.2013 and all requisite documents were duly furnished for processing the insurance claim. The final surveyor, Mr. KC Mohapatra, verbally assessed the net loss at Rs.1,01,48,372. However, to the complainant’s utter dismay, OP-2 settled the claim for a sum of only Rs.37,54,897. The complainant raised an objection vide written communication dated 07.03.2014, disputing the underpayment and seeking the balance of Rs.63,93,475. Despite several follow-up communications, the said differential amount remained unpaid. They further contended that the discharge voucher was procured by the OPs under misrepresentation and that such conduct amounted to deficiency in service and adoption of unfair trade practices. Accordingly, the complainant had sought recovery of the unpaid claim amount of Rs.63,93,475, along with interest and compensation.

5. OPs filed a joint written statement and contended that the complaint was not maintainable in law or on facts, as no valid cause of action had arisen. They contended stated that the complainant’s claim had already been assessed and settled on merits for Rs. 37,54,897, based on the report of Mr. KC Mohapatra, a licensed surveyor under the IRDA. The OPs clarified that although the gross loss was assessed at Rs.1,01,48,372, the insurer’s liability was reduced due to the complainant resorting to underinsurance of stocks. The value at risk on the date of loss, calculated from the complainant’s stock records, was Rs.28,78,44,072, while the total sum insured was Rs.12,00,00,000 only. Based on this, the stock was underinsured by 58%, and the claim amount was accordingly adjusted. OPs contended that the complainant accepted the amount of Rs. 37,54,897 without any protest and executed a discharge voucher on 25.02.2014 in full and final settlement. The OPs denied any deficiency in service and maintained that they had acted in accordance with the policy conditions. OPs submitted that there were discrepancies in the complainant’s version. Additionally, the OPs argued that the complaint was not maintainable, as the complainant was a commercial entity and thus not a 'consumer' under the Act, 1986. Therefore, the OPs prayed that the complaint be