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J&K Consumer Commission Rules Tata AIG's '' Warranty Unreasonable, Orders ₹96 Lakh Payout
The , has held guilty of for repudiating fire insurance claims filed by three walnut kernel trading firms in Kupwara. The Commission, comprising President (O) Smt. Nighat Sultana and Member Mr. Maheep Gupta, directed the insurer to pay a combined ₹96.63 lakh to the complainants, holding that the insurer's "" warranty was unreasonable given Kashmir's standard building practices.
When a Standard Kashmir Roof Became a ''
, , and — all based in Donwari, near Lolab Valley, Kupwara — had insured their walnut kernel stocks with Tata AIG. When fire destroyed their stocks, the insurer repudiated all three claims through identical letters dated , citing a policy exclusion for "" — structures with walls and/or roofs of wooden planks, thatched leaves, grass, hay, bamboo, plastic, asphalt cloth, canvas, tarpaulin, and the like.
The complainants admitted their shop roofs had wooden planks covered with CGI sheets — the standard mode of construction across Kashmir's mountainous, snow-prone terrain — but pointed out that the walls were built with burnt bricks and cement. They argued this could not be classified as "."
The Insurer's Shifting Grounds
Tata AIG defended the on the ground. During final arguments, its counsel additionally raised an investigator's report suggesting the fire might have been deliberately set to file a fraudulent claim. The Commission rejected this, noting that the letters were based solely on , and it is that an insurer cannot raise fresh grounds beyond those stated in the letter. The Commission also observed that the investigator's conclusion was merely a "possibility" — the survey report itself described the incident as "accidental in nature."
An 'Unwarranted' Warranty
The Commission acknowledged that courts cannot rewrite insurance contracts but held that they can examine the reasonableness of policy terms. Given that wooden plank roofs covered with CGI sheets are the universal construction standard in Kashmir, the Commission found the warranty "highly unwarranted."
"It needs no rocket science to prove that in whole of the Kashmir region or for that matter in any mountainous area prone to snowfalls, the topmost roofs of the buildings are constructed in a similar manner with wooden planks covered with the CGI sheets."
The Commission further noted that the insurer, knowing full well the topography and standard practices of the region, should not have imposed such a warranty in the first place.
: Ownership Passes on Delivery
The Commission also addressed the surveyor's deduction of 85%, 72.49%, and 78.748% respectively on the ground that the complainants lacked in stocks for which they had not yet paid their suppliers. Rejecting this, the Commission held:
"The ownership rights in goods automatically and simultaneously gets transferred to the buyer with the transfer of goods irrespective of the fact whether the goods were purchased on cash or credit or under any deferred mode of payment."
The Commission found that the complainants' practice of paying horticulturists gradually after the sales season was a normal trade practice, and the surveyor had been duly informed of this. It held that the surveyor should have treated the claims as on account of imperfect bookkeeping rather than making unwarranted deductions.
The Award
The Commission recalculated the losses, applying a 25% deduction for non-maintenance of proper books of accounts instead of the surveyor's deductions. The final awards were:
- (C.C. 33/2019): ₹30,96,667
- (C.C. 34/2019): ₹34,69,798
- (C.C. 36/2019): ₹30,97,341
These amounts include the net adjusted loss, compensation for at 8% from the date of () to the date of the order (), and ₹25,000 towards in each case. The insurer must pay within 30 days, failing which it will attract 6% annual interest on the entire amount until final payment.
