Insurer Cannot Force 'Cash Loss' Settlement Without Insured's Consent; Must Settle Claim Based on Assessed Repair Cost: Rajasthan State Consumer Commission - 2025-07-26

Insurer's Unilateral 'Cash Loss' Offer Rejected; Commission Upholds Repair Cost Award

Udaipur, Rajasthan – The State Consumer Disputes Redressal Commission has ruled that an insurance company cannot unilaterally impose a 'Cash Loss' settlement on an insured party without their consent. Upholding a District Forum's order, the Commission dismissed an appeal by Universal Sompo General Insurance, directing it to pay the assessed repair cost for a damaged truck, not a lower 'cash loss' amount.

The bench, comprising Presiding Member Arun Kumar Agrawal and Member Dinesh Kumar, affirmed the order against the insurer, highlighting the company's failure to process the claim in a timely and fair manner as a deficiency in service.

Case Background

The case originated from a complaint filed by Mahendra Singh, whose truck, insured with Universal Sompo for an Insured Declared Value (IDV) of ₹21 lakh, was severely damaged in an accident on July 24, 2011. The truck was financed by IndusInd Bank.

Following the accident, Singh submitted a claim. An estimate from an authorized workshop, Navneet Motors, pegged the repair costs at ₹16,80,710. Singh contended that since this amount exceeded 75% of the IDV, the claim should be settled on a 'Total Loss' basis.

Arguments from Both Sides

Universal Sompo General Insurance (Appellant) argued that its appointed surveyor assessed the loss differently. A final surveyor, Rameshchandra Sharma, estimated the repair cost at ₹9,68,270. However, the insurer contended that because Singh did not proceed with the repairs, the surveyor assessed the claim on a 'Cash Loss' basis at ₹6,62,000. The company claimed it sent multiple letters urging Singh to get the vehicle repaired and submit the bills, but received no cooperation, leading to the claim remaining pending. The insurer's appeal also faced a significant hurdle, having been filed with a delay of 914 days, which they attributed to their lawyer's negligence.

Mahendra Singh (Respondent) countered that he had formally requested the insurance company via a letter on October 3, 2011, to either repair the vehicle or settle the claim, but the company did neither. This inaction left him unable to repair the truck and caused him to default on his loan payments to IndusInd Bank. He argued that the insurer was deficient in its service by failing to settle the claim justly and promptly.

Commission's Findings and Ruling

The State Commission critically examined the facts and the conduct of the insurance company. It found several key lapses on the insurer's part.

First, the Commission accepted the insurer's explanation for the 914-day delay in filing the appeal, attributing it to the counsel's fault and proceeded to hear the case on its merits.

On the core issue, the Commission noted from the final surveyor's report that a 'Cash Loss' settlement requires the mutual consent of both parties. The judgment emphasized a crucial excerpt from the surveyor's report:

"...a claim on Cash Loss basis can only be settled with the consent of both parties, and no single party can enforce it alone."

The Commission concluded that Universal Sompo could not force Mahendra Singh to accept the lower 'Cash Loss' amount of ₹6,62,000 without his agreement.

Furthermore, the Commission rejected the insurer's argument that Singh failed to get the vehicle repaired. It found that Singh had explicitly requested the company to facilitate the repairs. The Commission stated:

"In this matter, after the complainant sent the letter dated 03-10-2011, the insurance company neither repaired the vehicle itself nor paid any amount to Navneet Motors for the vehicle's repair. For this reason, the complainant was unable to get the vehicle repaired."

The Commission also pointed out that the insurer violated the IRDAI guidelines, which mandate that a claim must be either accepted or rejected within 30 days of the final survey report. The insurer's failure to do either constituted a clear deficiency in service.

Final Decision

Finding no legal infirmity in the District Forum's decision, the State Commission dismissed the appeal and upheld the original order. Universal Sompo General Insurance is directed to pay Mahendra Singh ₹9,68,270 (the repair cost assessed by its own final surveyor) along with 12% annual interest from the date of the complaint (September 23, 2013) until payment, plus ₹5,000 for litigation costs. The ruling serves as a strong reminder to insurers of their obligation to settle claims fairly and in adherence to regulatory timelines and established principles of consent.