NCDRC Rules, Delay In Furnishing Insurance Coverage Documents Without Reasons Is 'Deficiency In Service'
Pranav B Prem
In a significant ruling, the National Consumer Disputes Redressal Commission (NCDRC), comprising Subhash Chandra (Presiding Member) and AVM J. Rajendra AVSM (Member), has held that an insurer’s delay in providing complete policy documents, particularly the insurance cover note, without any justifiable reason, amounts to ‘deficiency in service’. The Commission emphasized that such delay creates uncertainty for the policyholder regarding the extent of risk covered under the insurance contract.
The case arose out of a complaint filed by M/s Abhishek Cold Storage Pvt. Ltd., Raibareli, which had stored 60,543 and 41,880 bags of potatoes in its cold storage facility. The complainant had insured the stock under a Deterioration of Stock Insurance Policy issued by New India Assurance Company Ltd. for a sum of Rs. 90 lakhs, with the policy valid from 15.04.2008 to 14.11.2008. The premium of Rs. 50,400 was paid in full.
On 10.09.2008, a short circuit occurred in Chamber II of the cold storage. Subsequently, on 19.09.2008, the generator failed due to a water pump malfunction. A severe storm that evening led to an extended power outage until 22.09.2008. As a result, the required temperature inside the cold storage could not be maintained, and 31,609 bags of potatoes were damaged, causing a claimed loss of Rs. 27,81,592.
The complainant promptly filed a claim with the insurance company along with all supporting documents. However, the insurer rejected the claim via letter dated 27.05.2009 without furnishing any specific reason. It was only after repeated follow-ups that the insurer disclosed its grounds for repudiation in a subsequent communication dated 19.06.2009.
The insurer contended that the damage was not due to a machinery accident but rather the result of improper storage practices and negligence on the part of the complainant. The final survey report, dated 29.01.2009, indicated that the potatoes had been stored in excess of the facility’s approved capacity, without proper spacing or circulation, which led to temperature elevation. Furthermore, the report noted discrepancies in the complainant’s records regarding electricity supply, as compared with data from the local electricity sub-station.
The State Commission, in its order dated 19.08.2014, found that the insurance cover note had been issued only after the incident and held that the terms and conditions of the policy were therefore not binding on the complainant. It partly allowed the complaint and directed the insurer to pay Rs. 27,77,483 towards the assessed loss, along with Rs. 50,000 for mental and physical agony.
Challenging this decision, the insurer filed an appeal before the NCDRC. It argued that the repudiation of the claim was consistent with the terms of the policy and based on detailed surveyor reports. The insurer further submitted that the proper procedure was followed and that any delay in the issuance of documents did not affect the validity of the policy, which was otherwise accessible and understood by a specialized entity like a cold storage operator.
The complainant, on the other hand, reiterated that all procedures had been followed at their end and that the damage was indeed caused by unforeseen power failures. It was emphasized that the denial of the claim without timely reasons, and the post-incident issuance of the insurance document, constituted unfair treatment and bad faith on the insurer’s part.
Upon examining the records, the NCDRC noted that although the insurance policy was valid and premium paid in full, the insurance cover document was issued only on 24.10.2008—well after the incident. The Commission observed: “There is no plausible explanation as to why the complete contract details were not provided, notwithstanding the acceptance of complete premium and insurance liability. This by itself constitutes deficiency in service rendered by OP, as it exposed the policyholder to uncertainty with respect to the risk cover.”
However, the Commission also clarified that this deficiency alone did not render the contract void. It held that both parties were still required to adhere to the fundamental terms of the policy. Since the complainant had filed a claim under the same policy, the claim assessment had to be made strictly in accordance with the policy’s terms and conditions.
After analyzing the survey report and related documentation, the NCDRC concluded that the net loss, after considering under-insurance, shrinkage, rottage, and policy excess, was Rs. 12,62,851. Accordingly, the Commission modified the State Commission’s order to limit the insurer’s liability to this amount. Additionally, the insurer was directed to pay Rs. 50,000 as costs to the complainant. The appeal was thus disposed of with the above modifications, providing a balanced resolution while reaffirming the importance of timely and transparent communication by insurance companies.
Appearance
For the Appellant: Mr. Salil Paul, Advocate
For the Respondent: Mr. Nikhil Jain, Advocate
Cause Title: New India Assurance Co. ltd V. M/S Abhishek Cold storage pvt Ltd
Case No: First Appeal No. 1167 Of 2014
Coram: Hon’ble Mr. Subhash Chandra [Presiding Member], Hon’ble AVM J. Rajendra AVSM VSM (Retd.), [Member]
[Read/Download order]
