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Upholds New India Assurance's of ₹2.4 Crore Fire Claim on Policy Breach
Bench finds insured made , manipulated accounts, and failed to genuinely fight the fire.
The on Monday allowed an appeal by , setting aside a order that had directed the insurer to pay ₹2.4 crore on a fire insurance claim. The Court held that the of the claim by the insurer was justified as the insured, , had breached policy conditions by making and manipulating its books.
A bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva observed that the facts weighed heavily against the insured, citing multiple surveyor and investigator reports that pointed to a possible deliberate fire, inflated claims, and a lack of genuine effort to extinguish the blaze.
The Fire and the Claim
The respondent manufactured paper boards and had taken two fire insurance policies from New India Assurance—one for stocks worth ₹13 crore and another for buildings, plant, and machinery worth ₹14 crore. On , a fire broke out in the waste paper yard at its factory in Najibabad. The insured initially claimed a loss of ₹10 crore, later reducing it to ₹8.45 crore and finally to ₹7.31 crore.
The insurer appointed a preliminary surveyor, R.C. Bajpai, who flagged several abnormalities and recommended a meticulous investigation to rule out a deliberate fire. An investigative agency, , and a final surveyor, , both found that the insured had manipulated stock records, stored unusable old material, and that the fire's cause was doubtful. The final surveyor computed the net loss at ₹46,09,722 but noted that the insured had inflated the claim.
Based on these reports, New India Assurance repudiated the claim citing breach of , which require full disclosure and prohibit .
NCDRC's Order and the Appeal
The NCDRC, however, brushed aside the surveyor reports and held that since the cause of the fire was unknown, the insured need not prove its genuineness. It directed payment of ₹2.4 crore with interest, besides ₹3 lakh for deficiency in service and ₹1 lakh as litigation costs.
Aggrieved, the insurer appealed to the , which in stayed the NCDRC order on the condition that the insurer deposit ₹50 lakh.
's Legal Analysis
The Court examined the statutory framework under , which mandates that claims over ₹20,000 be assessed by a licensed surveyor. It noted that while surveyor reports are not sacrosanct, the insurer cannot reject them arbitrarily.
Citing its earlier decisions in and , the Court reiterated that a surveyor's report is the foundation for claim settlement but can be departed from for . It also referred to , which requires satisfactory reasons for appointing a second surveyor. Here, the first surveyor himself advocated for further investigation, making the subsequent appointments justified.
The Court further relied on , where ignoring a detailed survey report was held to cause a serious . The bench observed that the NCDRC had "simply brushed aside" the surveyor reports without addressing specific deficiencies raised by the insured.
On the issue of fire cause, the Court distinguished its earlier decisions in and , which held that the cause of fire is immaterial if the insured is not the instigator. However, the Court clarified that if there is of the insured's involvement, the claim may be denied. In this case, the surveyor reports and the insured's conduct—delayed reporting, lackluster firefighting, and —raised strong suspicions of .
Breach of Policy Conditions
The Court found clear violations of Policy Condition 6 (full disclosure) and Condition 8 (no ). The insured's Vice President and General Manager claimed that usable raw material was stored in the burnt tin shed. However, workers and supervisors testified that only unusable segregated waste had been stored there for years, and the material was old with cobwebs. The JCB owner stated that the shed was broken down before the fire, contrary to the insured's claim that it collapsed due to the fire.
Additionally, the insured's accounts showed abnormal variations: raw material to sales ratio dropped from 32.30% in 2007-08 to 19.29% in 2008-09, and the yield increased from 87% to 95% without justification. No stock register was maintained, and consumption figures were found to be arbitrary.
Key Observations
The Court made several significant observations:
"If an insured makes false averments to bolster its claim, contrary to the policy conditions, the insurer would be lawfully entitled to reject such claim on that ground without further ado."
"The misstatements made by the management of the respondent, referred to hereinbefore, categorically demonstrate that they willfully resorted to making incorrect factual statements to buttress the respondent’s insurance claim."
"In the light of the above facts, leaving aside the strong possibility that this was not an accidental fire or, at the very least, it was not a fire that the respondent genuinely tried to put out, the of the respondent's claim by the appellant, on the ground that Policy Condition Nos. 6 and 8 stood violated, was clearly sustainable."
The Final Decision
The allowed Civil Appeal No. 7221 of 2025 filed by New India Assurance, setting aside the NCDRC order dated . Consequently, the insured's cross-appeal (Civil Appeal No. 11416 of 2025) was dismissed. The Court directed the Registry to return the ₹50 lakh deposited by the insurer, along with accrued interest, to the appellant. Parties were ordered to bear their own costs.
The judgment reinforces that insurance claims founded on and manipulated evidence cannot survive, and that surveyor reports, though not binding, must be given due weight by consumer forums. It also clarifies that the presumption of accidental fire does not apply where the insured's conduct raises of or lack of .
