Insurance Company Cannot Arbitrarily Reduce Surveyor-Assessed Claim Without Appointing Second Surveyor: State Consumer Commission - 2025-01-09

Insurer's Unilateral Reduction of Surveyor's Assessment is 'Deficiency in Service': State Consumer Commission Orders Full Payout

Bhopal: The Madhya Pradesh State Consumer Disputes Redressal Commission has ruled that an insurance company cannot arbitrarily discard its own appointed surveyor's report and unilaterally reduce a claim amount. Holding this act as a "deficiency in service" and an "unfair trade practice," the Commission directed The New India Insurance Co. Ltd. to pay the full assessed amount of ₹10,76,292 to Syncom Health Care Ltd.

The bench, comprising Presiding Member A.K. Tiwari and Members Dr. Shrikant Pandey and D.K. Shrivastava, emphasized that if an insurer disagrees with the initial surveyor's assessment, its only recourse is to appoint another surveyor for a reassessment, not to reduce the claim internally.

Background of the Case

The complainant, Syncom Health Care, a pharmaceutical manufacturer, held a 'Standard Fire and Special Perils Policy' from New India Insurance, covering its Dehradun factory's stock for ₹3.4 crores. On the night of September 6-7, 2010, a cloudburst and severe rainfall led to flooding, causing significant damage to medicines and gift items stored at the facility.

Syncom Health Care filed a claim for ₹44,10,209. The insurance company appointed M/s Ravi K Singhal & Associates Pvt. Ltd. as the surveyor, who, after investigation, assessed the net payable loss at ₹10,76,292. The complainant had initially agreed to accept this amount.

Arguments Presented

Complainant's Arguments (Syncom Health Care):

- The company suffered a loss of over ₹44 lakh due to flooding, an event covered by the insurance policy.

- The insurer's appointed surveyor assessed the payable claim at ₹10,76,292 after a thorough investigation.

- Despite this, the insurance company arbitrarily offered a meager sum of ₹3,93,894 without any justifiable basis.

- When the complainant refused the reduced offer, the insurer unjustly repudiated the claim entirely by marking it as a "No-Claim," constituting a clear deficiency in service.

Opposite Party's Arguments (New India Insurance Co. Ltd.):

- Syncom Health Care is a commercial entity and does not qualify as a 'consumer' under the Consumer Protection Act, 1986. - The surveyor's report was not deemed reasonable.

- The company's internal team reassessed the claim to ₹3,93,894, citing reasons like the short expiry dates of some damaged medicines and the application of an 'under-insurance' clause.

- Since the complainant did not provide consent for the revised amount, the claim was closed, and thus there was no service deficiency.

Legal Principles and Court's Observations

The Commission systematically dismantled the insurer's defenses.

On the 'Consumer' Status of a Commercial Firm: Citing the Supreme Court's landmark 2023 judgment in National Insurance Co. Ltd. vs. Harsolia Motors , the Commission affirmed that a commercial entity purchasing an insurance policy does so for indemnification against potential loss, not for generating profit. Therefore, such an entity squarely falls within the definition of a 'consumer'.

"The insurance policy was purchased not for the purpose of making any profit but for indemnification of the loss caused due to the happening of contingencies mentioned in the insurance policy, therefore, surely the complainant was in the category of consumer," the Commission noted.

On the Sanctity of a Surveyor's Report: The Commission held the surveyor's report as a crucial piece of evidence that cannot be dismissed without cogent and contrary proof. It highlighted that the insurer's regional manager was not authorized to overrule the expert assessment of a qualified surveyor.

"The Regional Manager of the insurance company, Kishore Krishnarao Wahane, was not authorized to reduce the compensation amount assessed by the surveyor on his own level... If the insurer was not in agreement with the surveyor's report, the only option available to the insurance company was that it could appoint another surveyor for reassessment," the order stated.

The Commission found that the insurer failed to appoint a second surveyor or present an expert report to counter the initial assessment, rendering its decision to reduce the claim arbitrary. Relying on the Supreme Court's decision in Karnavati Bense Private Limited vs. New India Assurance Company Limited (2023), the bench concluded that repudiating a claim after the loss event has been admitted and assessed by a surveyor amounts to an unfair trade practice.

Final Decision

The State Commission partially allowed the complaint and found New India Insurance Co. Ltd. guilty of deficiency in service. The court ordered the insurer to:

1. Pay the complainant the assessed compensation of ₹10,76,292 .

2. Pay simple interest at 6% per annum on this amount from the date of filing the complaint (June 22, 2013) until the date of payment.

3. If the payment is not made within two months, the interest rate will increase to 9% per annum .

4. Pay ₹5,000 towards litigation costs.