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2021 Supreme(Online)(NCDRC) 148
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
C. Viswanath, PRESIDING MEMBER
ANJAN K. ROY – Appellant
Versus
M/s ORIENTAL INSURANCE COMPANY LTD. – Respondent
Consumer Case No. 19 of 2014
For the Complainants: Mr. Jos Chiramel
For the Opp.Parties: Mr. K.K Bhatt
Insurance policies must be interpreted favorably to the insured; failure to disclose exclusions leads to liability for claims.
Headnote:(A) Consumer Protection Act, 1986 - Section 21 - Insurance Policy - The complainant filed a claim after a fire incident, which was repudiated by the insurance company on grounds of exclusionary clauses not communicated to the insured - The complainant had duly notified all details of the ongoing operations to the insurer. It was held that the insurer failed to inform the exclusion and thus is liable for deficiency in service. (Paras 2, 10, 14)
(B) Principles of Insurance Law - The doctrine of contra proferentem was applied, necessitating that in cases of ambiguity in insurance contracts, the interpretation favoring the insured must be adopted. The failure of the insurer to notify the insured of pertinent clauses and terms led to the ruling in favor of the complainant. (Paras 5, 11, 14)
Facts of the case:
The complainant, engaged in drug manufacturing, suffered a fire loss during production, leading to a repudiated claim. Evidence showed the insurer had prior knowledge of the operations and failed to properly communicate the terms of coverage. The complainant sought reimbursement for losses incurred.
Findings of Court:
The court found that the insurer's repudiation of the claim was improper and that they had failed to fulfill their duty to inform the insured about critical policy conditions.
Issues: Whether the insurer's exclusionary clauses were properly communicated to the insured and if the claim was maintainable despite the insurer's objections regarding the nature of the operation at the time of the incident.
Ratio Decidendi: The insurer had a duty to clearly communicate policy exclusions; failure to do so resulted in liability for the claim under the ambiguous terms favoring the insured. The repudiation was deemed as unfair trade practice.
Result: Complaint allowed; insurer directed to reimburse the complainant.
| Table of Content |
|---|
| 1. claims following insurance policy disputes (Para 2 , 3) |
| 2. arguments regarding policy cover and disclosures (Para 4 , 5) |
| 3. court's interpretation of insurance obligations (Para 6) |
1. The present case is filed under Section-21 of the Consumer Protection Act, 1986 .
2. The case of the Complainant is that it is engaged in manufacturing of drugs at Units 14 & 15, KHB Industrial Area, Yelahanka, Bengaluru. The Complainant obtained Standard Fire & Special Peril Policy (SFSP) from the Opposite Party, vide Policy No.421500/11/2010/151, for the 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 23.11.2010 to 22.11.2011, vide Policy No. 421500/11/ 2011/149, for sum insured Rs.13,11,34,962/-. The Complainant further got the Policy renewed from 23.11.2011 to 22.11.2012 for sum insured Rs.17,77,97,189/-, vide Policy No. 421500/11/2012/139. 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. He visited the premises and submitted inspection report dated 07.03.2012. In the Preliminary Report Shri B. Gopalakrishnan opined that this type of peril is generally inclusive in Standard Fire & Special Peril Policy. 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, vide letter dated 10.10.2012, informed the Complainant that they received the Final Survey Report and on scrutiny of the report, prima facie the Insurance Claim was not tenable as per Clauses 1 and 3 of the General Conditions of the Policy. Complainant was, therefore, called to submit its explanation before final decision on the Claim of the Complainant. The Complainant sent his reply, vide letter dated 09.11.2012, pointing out that there were no change in the trade or occupation or other circumstances affecting the building insured under the Policy. Opposite Party, vide letter dated 23.11.2012 intimated the Complainant that the risk associated with the fire due to erection and testing were not covered under the Policy. Since the fire had occurred during testing, as confirmed in the Survey Report, it fell outside the scope of the operational cover. Complainant was also informed that at the time of renewal of the Policy, the Complainant did not disclose that new machinery/equipments were being erected/installed. The Opposite Party, therefore, 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. Aggrieved by the Repudiation and alleging deficiency in service, the present Complaint was filed before this Commission with the following prayer:-
“(a) to pass orders directing Opposite PartyNo.1 to pay a sum of Rs.1,14,50,617.00 (Rupees one crore fourteen lacs fifty thousand six hundred and seventeen only) to the Complainant being the amount of the Insurance claim along with interest Thereon till the date of filling of the complaint;
(b) to award pendente lite and future interest on the amount awarded as per prayer clause(a) above @18% per annum from the date of filling of the suit till realization of the amount awarded; to award cost of the proceeding in favour of the Complainant and against the Respondents ;and to pass such other or direction as deemed fir and proper in the facts and circumstances of the present case.”
3. The Complaint was contested by the Opposite Party by filing Written Statement in which it was stated that this Commission had no pecuniary jurisdic
