NCDRC Rules, Delay in Providing Complete Policy and Primary Coverage Documents Without Reason Amounts to Deficiency in Service
Pranav B Prem
In a significant ruling, the National Consumer Disputes Redressal Commission (NCDRC) has held that failure to furnish a complete insurance policy and coverage terms in a timely manner—despite full premium payment—constitutes a deficiency in service. The Commission clarified that while such a deficiency does not render the contract void, the insurer remains accountable for consequences arising from the delay in communication of essential policy terms. The ruling was passed in the matter of New India Assurance Co. Ltd. vs. M/s Abhishek Cold Storage Pvt. Ltd., wherein the Commission modified the decision of the Uttar Pradesh State Consumer Disputes Redressal Commission, Lucknow.
The dispute arose from a deterioration of stock claim filed by M/s Abhishek Cold Storage Pvt. Ltd., a company operating in Raebareli, Uttar Pradesh. The company had insured its cold storage facility under a “Deterioration of Stocks (Potatoes)” policy issued by New India Assurance Co. Ltd. for ₹90,00,000, valid from 15.04.2008 to 14.11.2008. The policy premium of ₹50,400 was fully paid, and the insurance cover was issued after a thorough pre-inspection and survey of the facility by the insurer’s representatives. The insured facility stored approximately 1,02,000 bags of potatoes at the relevant time.
On 10.09.2008, a short circuit occurred in Chamber II of the cold storage. This was followed by severe power disruptions due to a storm on 19.09.2008. During this period, the facility also experienced a generator breakdown. The resulting failure to maintain temperature allegedly led to the spoilage of 31,609 bags of potatoes. A claim amounting to ₹27,81,592 was filed. The insurer, however, rejected the claim through a letter dated 27.05.2009 without initially providing detailed reasons. It was only after multiple reminders that a subsequent letter dated 19.06.2009 was issued, explaining the grounds for repudiation.
The insurer defended its position by relying on surveyor reports dated 27.01.2009 and 29.01.2009, which concluded that the damage was not due to an accident involving refrigeration machinery—a condition required for coverage under the policy. The reports attributed the damage to improper storage practices, including overloading beyond the sanctioned capacity, lack of spacing around cooling coils, and failure to activate the generator promptly. According to the surveyor, the insured stored 1,02,424 bags despite a sanctioned capacity of only 95,000 bags. It also found that power supply logs from the local substation contradicted the cold storage’s own records, raising doubts about the extent of claimed outages.
Moreover, the final surveyor, Sanjay Khare, emphasized that even on days of alleged power failures, electricity was available for several hours—enough to sustain refrigeration. He also noted that temperature levels in the chamber began rising even before the major power disruptions occurred. As per the surveyor's calculation, after adjustments for underinsurance, shrinkage, rottage, and policy excess, the insurer’s net liability was only ₹12,62,851.
Before the State Commission, the complainant argued that the claim denial was arbitrary and unsupported by the policy terms, which were never disclosed before the incident. The complainant also claimed that the insurance company had acted in bad faith by rejecting the claim without proper reasoning and that the full policy wording was supplied only after the incident.
The State Commission had allowed the complaint partly and directed the insurer to pay ₹27,77,483 towards the assessed loss, ₹50,000 for mental and physical agony, and ₹10,000 in litigation costs. Aggrieved by this decision, the insurer filed an appeal before the NCDRC.
After carefully analyzing the documents, the NCDRC observed that although the insurer had accepted the full premium and the policy period began on 15.04.2008, the complete policy document was not issued until 24.10.2008—well after the incident which occurred between 10.09.2008 and 22.09.2008. This delay, the Commission noted, lacked any plausible explanation. The Commission held: “There is no plausible explanation as to why the complete contract details were not provided, notwithstanding the acceptance of complete premium and insurance liability.” It further observed: “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 NCDRC clarified that this deficiency did not nullify the contract. The parties continued to operate under the policy and accepted its existence. Therefore, the liability arising out of the claim had to be determined in accordance with the substantive terms of the policy, not disregarded entirely.
After reviewing both the preliminary and final survey reports and supporting materials, the Commission concluded the following:
Gross assessed loss: ₹27,77,483
Net liability (after underinsurance, shrinkage, rottage, and excess): ₹12,62,851
Accordingly, the NCDRC modified the State Commission’s order, limiting the insurer’s liability to ₹12,62,851 in line with policy terms. Additionally, it directed the insurer to pay ₹50,000 as litigation costs. The remaining parts of the State Commission’s order were left undisturbed.
Appearance
For the Appellant: Mr. Salil Paul, Advocate
For the Respondent: Mr. Nikhil Jain, Advocate
Cause Title: The 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]
