BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD.

CC  48  of 2012

Between:

M/s.  B. Girjijapathi Reddy & Company

D.No. 24/383-21D, Sujathamma Colony

Dargamitta, Nellore-524 003

Rep. by  Managing Director

B. Umapathy Reddy.                                   ***               Complainant

And

1)  M/s. Bajaj Allianz  General Insurance Company Ltd.

Regional Office : Far East Plaza

D.No. 3-6-111/8, Street No. 18

Main Road, Himayathnagar

Hyderabad-500 029.

Rep. by its  Regional Manager

2)  M/s. Bajaj Allianz  General Insurance Company Ltd.

6^th Floor, Block-II, White House

Begumpet, Hyderabad-500 016

Rep. by its  Branch  Manager.                    ***               Opposite Parties

Counsel for the complainant:                      M/s. V. Gourishankara Rao

Counsel for the Ops:                                   M/s. S. N. Padmini

CORAM:

                              SMT. M. SHREESHA, PRESIDING MEMBER

&

                             SRI  S. BHUJANGA RAO, MEMBER

FRIDAY, THE TWENTY EIGTH DAY OF JUNE TWO THOUSAND THIRTEEN

ORAL ORDER:  (Per Smt. M. Shreesha, Member)

***

1)                 The brief facts as set out in the complaint are that the complainant   insured his  Hitachi  Hydraulic Excavator  with the opposite party insurance company for a sum of Rs. 1,53,04,000/-  for a period of one year  commencing from   26.6.2010 to 25.6.2011 by paying premium of Rs. 3,58,497/-  and a  Contractors  Plant & Machinery  Policy was issued to the complainant.   While so,  on 31.10.2010  the excavator  accidentally slipped and  fell  in the sump   where  the  rain water   was accumulated  with mud while working in  open cast mine  at Medipally of Ramagundam in  Karimnagar Dist.    The complainant  immediately informed  the accident  to the opposite party  which in turn   appointed one Mr.   Kishore of M/s. Intech  Insurance Surveyors  & Loss Assessors  on  9.11.2010  to  inspect and estimate the damage caused to the vehicle.  The  surveyor inspected the excavator  on   10.11.2010 and the complainant’s  claim was registered  for Rs. 48,89,193/- which  was the  amount incurred by the complainant towards repair charges.   The complainant submitted  all the quotations  issued by the workshop to the surveyor  for an amount of Rs. 56,81,013/-.    The surveyor submitted his report only  in August, 2011 and   that Op1 sent an e-mail on  27.11.2011 asking the complainant to clarify  as to why  the fencing was not  put around the pit.   The complainant submitted a representation to Op2  demanding him to furnish  a copy of the surveyor’s report but on  29.9.2011  the Op1  repudiated  the claim on the ground that “the cause of loss does not fall under the purview of the  policy, and that loss or damage due to electrical or mechanical breakdown, failure, breakage or derangement  etc., is  not covered.

2)                 The complainant submits that the damage caused to the excavator  was neither due to electrical or mechanical breakdown or defective  lubrication or lack of oil but  only due to  accidental fall of  the excavator in  the sump, and that the excavator was  not operated   either  in  rain water or in the mud.  A copy of the  surveyor’s report was furnished along with  the repudiation letter  and this showed that the surveyor assessed the gross loss at Rs. 41,45,199/- and a sum  of Rs. 12,43,559/- was deducted towards depreciation at 30%, Rs.  70,000/- was deducted towards salvage, Rs. 3,52,539/- was deducted towards under insurance and also deducted 1% policy excess at Rs. 1,53,040/-.   The surveyor finally assessed the net loss at Rs. 23,26,060/-.   The complainant got issued  a  legal notice on  22.12.2011  demanding  to pay Rs. 48,89,193/-  for which Ops gave reply stating that  proper care and caution  was not taken by the  operator  while handling the excavator in the loose soil and that he did not stop the engine immediately  and  negligently tried to take out the excavator while the engine  was in a running condition.   The complainant denies that the  operator was  negligent   and that the excavator operator in his statement dt.  10.11.2010 stated that  while he was loading in the third shift duty, there was a sump at a distance of  5 mtrs and the said sump was almost covered  with silt because of  the recent rain water, and while  he tried to  turn the excavator  track chains, because of the coal underneath, the excavator bent  and sunk into the sump because of the weight  of the engine.  The operator’s  cabin  also  sank.   When he tried to pull the excavator  with the  support of the bucket by  swinging  the excavator,  it stopped completely.    The complainant submits that there is  no  negligence on behalf of the excavator operator  and seeks  directions to the  opposite parties  to pay the claim amount of Rs. 48,89,193/- with interest  @ 18% p.a., from  31.10.2010  together with compensation of Rs. 2 lakhs and costs of Rs. 25,000/-. 

3)                The opposite parties filed  their written version admitting  the issuance of policy  for the period from  26.6.2010 to 25.6.2011.  They also admitted that on   31.10.2010  the complainant’s excavator was damaged for which   a claim was made for Rs.  48,89,193/-.  The opposite parties submit that  Mr. Gopal Reddy  who is the excavator operator  in his  statement  stated that  while loading when he tried to turn the truck chains, due to coal underneath the track chain, the excavator leaned into the sump, since the engine, hydraulic  pump became counter weight  as they were located  in rear side,   the excavator went into the sump and stranded  in the sump up to  silencer level and when he tried to swing the excavator  to pull up  with the bucket support the excavator self-stopped.  The  opposite parties submit that  this itself shows that the insured was running the excavator in the mud water. 

4)                The complainant  got the excavator repaired  with M/s.  Telco  Construction  Equipment Company Ltd. (TELCON) and filed  invoices  but withheld the  actual information  furnished by TELCON  and also  analysis report  along with photographs which discloses the manner  and parts of damage.    In the service report dt. 17.5.2011   issued by the Service Engineer of TELCON  discloses that  when the excavator  was received by them, the  engine was not starting. 

5)                 The opposite parties further submit that the inspection report reads as follows : 

          “It discloses  that they  inspected  the accident  spot and found the machine inside  the loose mud pit towards boom side and total machine was loaded  on bucket, total travel device of both sides were  in the mud water and tried to  crank the engine, but  engine was not able to crank and found the crankshaft  endplay has no play,  then removed  the lube oil filter, and found  fine  and shiny  metal particles  in the  oil,  then  removed the oil pan and found heavy  mud  mixed with oil and copper metal flakes  in the oil pan, after inspecting the same gave a specific  conclusion  confirming that  “mud water  entered from muffler and further entered  inside the  engine through exhaust  valve and  mixed with engine oil.   After the incident machine was  run quite some time to  swing the machine to opposite side, due to mud water contamination with engine oil, engine got seized.”

The  opposite party insurance company repudiated the claim on the ground that “the said loss is not falling under the purview of the policy as per the Exception (b) of the policy which reads as follows :

          (b)      Loss of damage due to electrical or mechanical  breakdown, failure, breakage or derangement, freezing of coolant or other fluid, defective lubrication  or leak of oil or coolant, but  if  as a consequence  of such breakdown  or derangement  an accident occurs causing external  damage, such  consequential  damage will be indemnifiable.

It is the  opposite parties case that the surveyor in his report  specifically stated that  there were  no external/physical  damages to the cabin and also  to the external parts  except the mud/slush marks  over the travel  motor assembly and track motor assembly  areas and  after the  dismantling  of the engine  also no physical  damages were found to  travel motor, main pump, fan pump and swing motors.    The surveyor also  observed “ had the operator  stopped the engine, when he noticed the excavator  is sinking, there would be no loss/damage as there is no possibility of entering  the mud water into the engine in stopped condition, and therefore the loss is due to  wilful negligence of the insured”.  Therefore they submit that  their repudiation is justified and seek  the dismissal of the complaint with costs.

6)                The complainant in  proof of his case filed the  affidavit evidence of the Managing Director and  Exs. A1 to A13  are  marked on their behalf.  The opposite parties filed the  affidavit evidence of  Senior Legal Executive and  Exs. B1 to B6 are marked  on their behalf.  The insurance surveyor also filed his affidavit evidence. 

7)                The counsel for the opposite parties filed her written arguments.

8)                The points that arise for consideration are:

i)             Whether  there is    any deficiency of service  on behalf of  opposite parties? 

ii)           whether the complainant is entitled to the reliefs sought for  in the complaint?

9)                The facts not in dispute is   the issuance of Contractors  Plant  & Machinery Policy for a period of one year  commencing from 26.6.2010 to 25.6.2011 evidenced under Ex. A1 which is the policy schedule.   Ex. A3 is the claim  made  by the complainant to the opposite parties with respect to   the  damaged excavator.   Ex. A4  is the letter  written by the complainant  to Ops on  10.11.2010 informing  about the damage caused to the excavator.    Ex. A5  is the  bunch of bills relating to the repair charges  of the concerned excavator which are as follows :

They are issued by TELCON  for Rs. 48,89,193/-  for which TELCON  had issued a receipt vide Ex. A7 dt. 15.7.2011 for an amount of Rs. 48,89,193/-.    Ex. A8 is the legal notice got issued by the complainant  to Ops on 13.9.2011 calling upon them to settle the  claim for which  Ops  replied vide Ex. A9 dt. 29.9.2011 enclosing the surveyor’s report  and stated in this letter that the claim is repudiated as per  Exception (b) of the policy  which reads as follows :

(b)      Loss of damage due to electrical or mechanical  breakdown, failure, breakage or derangement, freezing of coolant or other fluid, defective lubrication  or leak of oil or coolant, but  if  as a consequence  of such breakdown  or derangement  an accident occurs causing external  damage, such  consequential  damage will be indemnifiable.

Ex. A10 is the surveyor’s report  wherein the assessed  loss  (as per XL) is  Rs.  41,45,199/- and the net assessed loss is Rs. 23,26,060/-.    Ex. A12 is the legal notice got issued by the complainant to the opposite parties to settle the claim with interest and costs.

10)               It is the main case of the opposite parties that  the claim cannot be settled  as it falls under   Exclusion (b) of the policy  and that the loss or damage due to electrical or mechanical  breakdown, failure, breakage or derangement, freezing of coolant or other fluid, defective lubrication   and also because of the negligent operation of the  excavator  by the operator are not indemnifiable.    The learned counsel for the opposite parties relied on  Exs. B3 & B4  which are  workshop  component  failure analysis  report dt.  22.11.2010 and  the service report  dt. 30.10.2010 respectively.  The conclusion in  Ex. B4 reads as follows : 

          As per the observations it is confirmed that actually the machine was submerged in the  mud water up to  tappet cover level of the engine, complete main pump, radiator,  counter weight and engine was submerged in the loose mud water and after that  mud water entered from  muffler  and further entered inside the engine through exhaust valve and mixed with engine oil.   After the incident, the machine was run for quite some time to swing the machine to opposite side,  due to mud water contamination with engine oil, the engine got seized. 

Keeping   in view this inspection report, the opposite parties contended that  if the operator had immediately switched off the engine  when the excavator had fallen  in the sump, the mud water would not have  entered into the  excavator and its   consequential loss could have been averted.    It is only because of the negligent operation of the excavator operator  that this occurred and  submit  that  their repudiation is justified. 

11)               Though the opposite parties relied on Exception (b) of the policy which reads as follows :

Loss of damage due to electrical or mechanical  breakdown, failure, breakage or derangement, freezing of coolant or other fluid, defective lubrication  or leak of oil or coolant, but  if  as a consequence  of such breakdown  or derangement  an accident occurs causing external  damage, such  consequential  damage will be indemnifiable.

We observe from the material on record that  there is no documentary evidence  to establish that  the damage was due to mechanical or electrical breakdown, failure or derangement  or defective lubrication etc.    It is the case of the opposite parties that the operator should have  immediately  stopped the  engine  and only because  of his negligence the entire engine got damaged.   We observe from the statement  and also the findings of the surveyor  that the operator only tried  his best  to  get the excavator out of the sump and that the engine had stopped by itself.   

12)               The surveyor  in Ex. B5 dt. 25.9.2011  reported the statement of  Sri Gopal Reddy, operator of the excavator as follows :   

          I Gopal Reddy, working as  Operator in excavator No. 672-6 with BGR & Co.  Medipally, Open Cast mine since 19.8.2009.   There is a sump nearby which is about 5 meters depth and due to recent rains,  the mud and silt accumulated in the sump while loading, I have checked the sump with the bucket and started loading.   Since the sump was in vertical and when I tried to turn the track chains, due to coal underneath the track chain, the excavator leaned into the sump.   Since the engine, hydraulic pump, become counter-weight as they are located  in rear side.  The excavator went into the sump and stranded in the sump up to the silencer level.    Since it was sinking, I tried to swing  the excavator to  pull up with the bucket support, but the engine was stopped. 

13)               The aforementioned statement only establishes  that the excavator did fall into the sump   which is  about 5 mtrs depth  and due to recent rains, the mud and silt  accumulated  in the sump.   This fact has not been disputed by the opposite parties.    The fact remains that the excavator  fell into  the sump  and  that   there was mud and silt accumulated  in the sump  because of rains.    The statement of the operator only establishes that  he tried his level best  to get the excavator out of the sump as he tried  by swinging the excavator to  pull up with the bucket support but by then the engine had stopped.   This statement in no way evidences that there was negligence  or wilful operation by the excavator  operator.    It only  manifests that the operator had tired his level best to  pull out the excavator  from out of the sump.    In his findings the surveyor has  stated that  the excavator was  found with  mud  and slush at the  travel motor assembly and track motor  assembly areas.      It is also not in dispute that the engine was  stopped  and  was removed  which the surveyor  had inspected.   The service engineer of TELCON  informed the surveyor  to inspect whether  there are damages to the internal parts.    Upon dismantling the engine the surveyor found the following damages:    

14)               The aforementioned table shows that  the engine was damaged.  It is the case of the opposite parties that  it was damaged due to mechanical  break- down.   The meaning of ‘mechanical break-down reads as follows:

“A Mechanical Breakdown is defined as the inability of a covered part(s) to perform the function(s) for which it was designed, due solely to defects in materials or faulty workmanship. Note: Mechanical breakdown does not include damage due to negligence, damage caused by an accident, or the gradual reduction in operating performance due to wear and tear.

15)               In the instant case the excavator accidentally fell into the sump and has nothing to do with  the mechanical break-down as we could see that that the mechanical break-down  excludes wear and tear and also  any defect in the  equipment  which in the instant case  the damage resulted only because of the accidental fall  into  the   sump.   The excavator  was working without any problem prior to this fall  which occurred in the third shift  due to  operations  in  open  cast mines.   Therefore, we  are of the  considered view that the damage  caused to the excavator is not due to  mechanical break down  and the repudiation  by the opposite parties  under the Exception (b) of the policy  is not justified, and amounts to deficiency in service. 

16)               Now we  address ourselves to the claim made by the  complainant  and the report of the surveyor.    The summary of the loss assessment  made by the surveyor  is as follows : 

The aforementioned table shows that  the deprecation at 30% was deducted and the surveyor  has not stated anywhere  as to how he arrived at  depreciation except for stating  that it  depends on the life of the  parts and that the details are  reflected in the Excel sheet.    When the excavator  for which insurance was taken the value was assessed at Rs. 1,53,04,000/- as per Ex. B1 policy and the policy was issued  just four months prior to  the  accident  i.e., on 26.6.2010, we are of the considered view that depreciation at 10%  would  meet the ends of justice and this could be deducted from the claimed amount.    At the same time salvage  of Rs. 70,000/-  and  as well as policy excess at 1%   as per the terms of the policy are to be deducted.

17)               We also rely on the  judgement of National Commission  in New India Assurance Company Ltd Vs. M/s Dani Mourdhwaj Cold Storage Pvt. Ltd. in R.P. No. 4113 OF 2007 decided on  10. 2. 2012  in which the National observed that:

“The Surveyor has not recorded any reasons on the basis of which he has assessed the total value of the cold storage as Rs.1,20,00,000/-.  The contention of the Counsel for Petitioner that this was done after taking into account the quotations obtained from three contractors which form a part of the Surveyor’s report does not inspire much confidence because the quotations were only in respect of the insulation system wherein the contractors assessed its cost to be between Rs.12,11,000/- to 13,11,082/- while the Surveyor has assessed it to be Rs.17,61,534/- without assigning any reasons.  In the same way, we are unable to accept the other valuations in the absence of any reason whatsoever for recording these findings. 

In view of these facts, we agree with the finding of the State Commission regarding the loss in respect of the cold storage and potatoes on the basis of Surveyor’s report without taking into account the deductions made for under insurance and uphold the same.”

Even in the instant case, we observe that the surveyor  has not given any substantial reasons as to how the valuation  made by the insurance company at the time of issuance of policy is wrong.   There are no detailed reasons  recorded by the  surveyor  the basis on which he has  assessed the total value of the excavator at Rs. 1,74,80,000/- whereas the damage excavator as per the policy is Rs. 1,53,04,000/-.  In his  report he  stated that  he has arrived this amount  “by deducting trade discount of 5% and adding duties, taxes and transportation @ 15% from the quotation of TELCON dt. 4.1.2011.  Hence underinsurance is applicable”.   There is no rule position which has been filed by the surveyor in support  of this calculation of under insurance.   Hence the amount which has been deducted by the surveyor  against underinsurance is  being disallowed. 

          Rounded off  to  Rs. 35,07,639/-

18)              To reiterate, we also observe from the record that  the complainant  paid  an amount of Rs. 48,89,193/- by way of cheque to TELCON  evidenced under Ex. A6 for which  TELCON issued receipt evidenced under Ex. A7.     Ex. A5 a bunch of receipts also evidences that  the complainant had paid Rs. 48,89,193/-  towards repairs. 

19)              Therefore, we are of the considered opinion that an amount of Rs. 35,07,639/-  may be paid against the claim of Rs. 48,89,193/- with interest @ 9% p.a., from the date of repudiation till the date of realization together with costs of Rs. 5,000/-.   

20)              In the result this  complaint is allowed in part directing the  opposite parties to pay  Rs. 35,07,639/- with interest @ 9% p.a., from the date of repudiation i.e., from 29.9.2011  till the date of  realization together with costs of Rs. 5,000/-.  Time for compliance four weeks. 

1)       _______________________________

PRESIDING MEMBER    

2)           ________________________________

MEMBER    

APPENDIX OF EVIDENCE

WITNESSES EXAMINED FOR

COMPLAINANT                                                                              OPPOSITE PARTIES

 None                                                                                      None

DOCUMENTS MARKED FOR  COMPLAINANT:

Ex. A1             30.06.2010                  Copy of Policy schedule

Ex. A2             30.05.2077                  Copy of invoice of TELCON.  

Ex. A3             22.07.2011                  Notification of physical loss or damage

Ex. A4             10.11.2010                  Letter addressed by  S. Gopal Reddy to Op company

Ex. A5                  ---                           Bunch of bills issued by TELCON.

Ex. A6             14.07.2011                  Copy of cheque issued by complainant to TELCON

                                                            For Rs. 48,89,193/-

Ex. A7             15.07.2011                  Receipt issued by TELCON to complainant for Rs.

                                                            48,89,193/-

Ex. A8             13.09.2011                  Legal notice got issued by complainant to Ops.

Ex. A9             20.09.2011                  Reply of Ops to Ex. A8 notice.

Ex. A10&        25.09.2011                  Copy of survey report of  Intech along with covering letter

Ex. A11

Ex. A12           22.12.2011                  Another legal notice got issued by the complainant to Ops.

Ex. A13           23.02.2012                  Reply of Ops to Ex. A12 notice

DOCUMENTS MARKED FOR  O.Ps:

Ex. B1             30.06.2010                 Policy schedule

 Ex. B2            10.11.2010                  Original letter addressed by  S. Gopal Reddy to Op

                                                            company

Ex. B3             22.11.2010                  Copy of  Workshop Component  Failure  Analysis Report.

Ex. B4             30.10.2010                  TELCON service report.

Ex. B5             25.09.2011                  Original survey report of Intech.

Ex. B6             16.04.2012                  Reply notice of Ops addressed to complainant.

1)      _______________________________

PRESIDING MEMBER 

3)           ________________________________

MEMBER  

                                                                                      28/06/2013

*pnr

UP LOAD – O.K.