Pranav B Prem

The National Consumer Disputes Redressal Commission (NCDRC), presided over by Mr. Subhash Chandra and AVM J. Rajendra, dismissed a complaint filed by Roland Exports against National Insurance Company Ltd., holding that the terms and conditions of insurance policies must be strictly enforced. The Commission emphasized the significance of surveyor and forensic reports in deciding insurance claims and found no deficiency in service on the part of the insurer.

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Factual Background

Roland Exports had obtained a Standard Fire and Special Perils Insurance Policy from National Insurance Company Ltd., covering stocks of yarn and fibre stored across various locations, including its godown at Goindwal Industrial Complex, Tarn Taran, Punjab. The sum insured under the floater policy was ₹26 crores, with a 30% co-insurance by Universal Sompo General Insurance Co. Ltd. On 8th October 2011, a fire broke out in the insured godown, allegedly destroying approximately 280 metric tonnes of polyester raw material valued at ₹3.5 crores.

The incident was immediately reported to the fire department, the police, the complainant’s bankers (Allahabad Bank and State Bank of India), and the insurer. A claim for ₹2,88,76,088 was lodged under the policy. The insurer appointed three independent agencies to investigate the claim: M/s Ashwani Gupta & Co. for preliminary assessment, M/s Truth Labs for forensic analysis, and M/s Atul Kapoor & Co. for final loss quantification.

The complainant alleged that despite providing all requested documents and explanations, the insurer wrongfully repudiated the claim based on unfounded allegations of arson and misrepresentation. It was contended that the insurer neither shared the adverse findings of the surveyors nor provided an opportunity to rebut them before issuing a repudiation letter on 30th September 2013. The complainant argued that this amounted to deficiency in service and sought compensation along with interest and damages for mental agony.

Contentions of the Parties

The complainant contended that the repudiation was arbitrary and based on conjectures. It maintained that the fire was accidental, possibly caused due to festivities during Dussehra, and that the forensic report’s findings regarding the use of accelerants were speculative. The complainant also pointed out that the surveyors’ reports contained internal contradictions and that the insurer failed to engage with its detailed response to the show-cause notice. It was alleged that the insurer concealed crucial survey reports, which were only accessed later under the Right to Information Act.

On the other hand, the insurer argued that the complaint was frivolous and filed with mala fide intentions. It contended that the complainant, being engaged in commercial trading and manufacturing activities, was not a ‘consumer’ under the Consumer Protection Act. The insurer also raised objections regarding the non-joinder of necessary parties like the co-insurer and the banks holding a charge over the insured goods.

On merits, the insurer relied heavily on the reports of the three appointed agencies. The preliminary surveyor reported non-cooperation by the complainant, discrepancies in stock records, and physical implausibility of storing the claimed quantity of material in the given space. Truth Labs, in its forensic report, confirmed the presence of kerosene accelerants and signs of deliberate ignition. It also noted fabrication in stock registers, which were allegedly written at one time by the same person. The final surveyor assessed the net loss at ₹50,34,186, much lower than the claimed amount, and recommended that the insurer deny liability due to breach of policy conditions and suspected fraud. Based on these findings, the insurer repudiated the claim for violation of Conditions 6 and 8 of the Standard Fire Policy, which relate to the production of authentic records and exclusion of liability in cases of fraud or wilful misconduct.

Observations and Findings of NCDRC

The Commission, after examining the pleadings, evidence, and arguments, upheld the insurer’s decision to repudiate the claim. It noted that the insurer had appointed independent and qualified agencies to assess the incident, and their reports provided sufficient grounds for denial of liability. The surveyors and forensic experts unanimously pointed to serious irregularities, including the presence of accelerants like kerosene, fabrication of stock records, and implausibility of the claimed stock quantity.

The NCDRC referred to the Supreme Court's decisions in Sri Venkateshwara Syndicate v. Oriental Insurance Co. Ltd [(2009) 8 SCC 507]. and Khatema Fibres Ltd. v. New India Assurance Co. Ltd [2021 SCC OnLine SC 818], which underline the importance of giving due weight to surveyor reports unless there is substantial reason to disregard them. The Commission observed that the complainant had failed to rebut the adverse findings or provide convincing explanations for the discrepancies noted. The insurer’s reliance on expert reports was found to be justified, and the repudiation of the claim was held to be within the scope of the policy terms and conditions.

The Commission also emphasized that insurance contracts are governed by the principle of utmost good faith (uberrima fides), and any breach, such as providing false records or misrepresenting facts, disentitles the insured from claiming indemnity. Furthermore, the insurer’s issuance of a detailed show-cause notice and consideration of the complainant’s reply indicated that due process was followed.

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Verdict

The NCDRC concluded that the repudiation of the claim by National Insurance Company was neither arbitrary nor deficient in service. The insurer had acted in accordance with the terms of the policy, based on comprehensive investigations by independent experts. Consequently, the complaint was dismissed, and no order as to costs was made.

Appearance

For the Complainant: Mr. A. Mishra, Advocate

For the Opposite Party: Mr. Yogesh Malhotra, Advocate

Cause Title: Roland Exports V. National Insurance Company

Case No: C.C. No. 218 of 2014

Coram: Hon’ble Mr. Subhash Chandra [Presiding Member], Hon’ble Avm J. Rajendra, AVSM VSM (Retd.) [Member]

[Read/Download order]