PER MRS. M. SHREESHA, MEMBER 1. Aggrieved by the order dated 03-07-2013 passed by Andhra Pradesh State Consumer Disputes Redressal Commission at Hyderabad (hereinafter referred to as ‘the State Commission’) in CC No.88 of 2012, CC No.89 of 2012 and CC No.90 of 2012, these First Appeals, namely, FA No.553 of 2013, FA No.554 of 2013 and FA No.555 of 2013, have been preferred by the Complainants, namely, M/s Sona Poultry Farm in CC No.88 of 2012 and CC No.89 of 2012 and M/s. Sona Agencies, a partnership firm, in CC No.90 of 2012. 2. For the sake of convenience, FA No.553 of 2013 arising out of CC No.88 of 2012 is taken as the lead case. By the impugned order, the State Commission has dismissed the Complaints on the ground that the repudiation by the Insurance Company is justified as the Complainant did not furnish the correct address where the stock was kept, in the proposal form. 3. The facts material to the case are that the Complainant opened a current account with the first Opposite Party (hereinafter referred to as ‘the Bank’) vide A/c No.6612618376 and a loan of Rs.30,00,000/- was sanctioned in the year 2005 and same was enhanced to Rs.1,00,00,000/- in December, 2007. Having enhanced the loan limit, the Bank obtained an Insurance Policy from the second Opposite Party (hereinafter referred to as ‘the Insurance Company’) for an amount of Rs.50,00,000/- covering the period from 09-04-2009 to 08-04-2010. It was stated that the requisite premium be deducted from the Complainant’s account by the Bank. While so, on 02-10-2009, the town of Kurnool and its neighbouring villages were affected with flash floods and the Complainant averred that all the assets, namely, raw material, eggs, etc., which were insured under the aforenoted policy, was damaged. The entire claim amount for all the policies taken, the subject matter of the three Complaints, amounted to Rs.1,26,16,535/-. A claim was made with the Insurance Company and the Surveyor visited the premises at No.40-30-3, Medum Compound, Kurnool, 40-30-DA3, Medum Compound, Kurnool, 44-16-J-5, Roja Prakashnagar of Kurnool Town, Sy. No.171/2A1 of Mamidalapadu Village and Sy No.519/2 of Pullur Village and submitted his report confirming the loss. It was stated that the Insurance Company repudiated the claim vide a letter dated 24-02-2010 on the ground that the Complainant has changed the risk locations where the stocks were supposed to have been kept i.e. Door No.354-62, Park Road, Kurnool, as against the premises mentioned supra, without any intimation to the Insurance Company. It was averred that the Bank Manager and its officials had frequently visited the godowns situated in the aforesaid premises and were collecting the stock statements at regular intervals, and were thereby in the knowledge of the fact that the Complainant’s stock was at the godowns. The Bank had taken the policy from the Insurance Company and had wrongly mentioned the address of the premises. It was only due to the negligent act of both the Opposite Parties that the Complainant had suffered. It was specifically pleaded that even the Insurance Company had issued the policy without conducting any inspection of the godowns. Hence, the Complainant approached the State Commission seeking a direction to both, the Bank and the Insurance Company, to jointly and severally pay an amount of Rs.50,00,000/- with interest @18% p.a. from the date of occurrence of the incident i.e. 02-10-2009 till the date of realization together with compensation of Rs.5,00,000/- and costs of Rs.50,000/-. 4. The Bank filed their Written Version stating that the account opened by the Complainant is an Open Cash Credit Limit Account sanctioned for the purpose of working capital requirements. It was denied that the said policy was taken for the benefit and interest of the Complainant. It was stated that the role of the Bank was only that of a facilitator and as per the terms & conditions of the agreement ‘the Bank is at liberty and is not bound to effect such insurance, at the risk, responsibility and expense of the borrower with any insurance company only to the extent of the value of the security as estimated by the Bank and that, in the event of insuring the security, the Bank shall not be or deemed to be responsible or liable for non-admission or rejection of the claim, wholly or in part, whether the claim is made by the Bank or the borrower’. It was averred that the Bank had only forwarded the information given by the Complainant to the Insurance Company and never acted on its own. The sudden floods on 02-10-2009 were admitted by the Bank. It was averred that if there were any omissions in the Insurance Policy, the complainant should have brought it to the notice of the Bank and should have mentioned the correct address in the policy and that there was no negligence on their behalf and no liability can be fastened upon them. 5. The Insurance Company filed the Written Version admitting that a Standard Fire & Special Perils Policy No.051100/11/09/11/00000053 was issued to the Complainant for the period 09-04-2009 to 08-04-2010 at Door No.40/354-62, Park Road, Kurnool covering the risk of storage of stocks of eggs, poultry feed, etc., belonging to the insured trade and occupied as godown only. Based on the address provided and premium paid by the Bank, since the Bank’s interest evolved on the property and on the stocks of the insured, the Insurance Company issued the policy in question at Door No.40/354-62, Park Road, Kurnool. It was averred that neither the Complainant nor the Bank intimated any change of address and specifically the policy was issued to the aforenoted address. It was pleaded that the Bank had addressed a letter to their AGM admitting that by oversight, the address in the policy was submitted by the Bank officials in the proposal form and for the same fault, the Insurance Company cannot be made liable. The Surveyor conducted the survey at (1) D.No.40-30-3, Medum Compound, Kurnool, (2) D.No.40-30-D-A-3, Medum Compound, Kurnool, (3) D.No.40-30-D-A-5, Medum Compound, Kurnool, (4) D. No.44-16-J-5, Roja Prakash Nagar, Kurnool Town, (5) at Sy. No.171/2A-1, Mavidalapadu Village and (6) at Sy. No.519/2, Pullur Village and as per Survey Report dated 04-07-2011, the Surveyor without prejudice assessed the loss as Rs.44,75,000/- as per the terms & conditions of the policy. It was pleaded that in view of the wrong address given by the Complainant and the Bank, the Bank alone is liable to pay and no deficiency can be attributed to the Insurance Company for having repudiated the claim on the ground that the wrong address was mentioned in the proposal form. 6. The State Commission based on the evidence adduced i.e. Exhibits A1 to A8 and D1 to D3 which are being the loan agreement, Insurance Policy, certificate issued by MRO, letter addressed to surveyor by proprietor, letters addressed to OP1 and OP2, copy of legal notice, order copy of Debt Recovery Tribunal, Nagpur, Insurance policy No.051100/11/08/11/00000971 received per IA No.166/13, orders dated 30-01-2013, copy of Standard Fire and Special Perils Policy, Repudiation letter dated 21-09-2011 and Surveyor’s report dated 07-04-2011 respectively, dismissed the Complaint observing as follows: “But when in the policy Door No.354-62, Park Road, Kurnool is mentioned it has to be inferred that the same address was given in the proposal form as the premises for coverage of the risk. The complainant did not mention in the complaint that he furnished the premises as bearing No.40-30-3, Madum compound, Kurnool, etc., to the Bank authorities and that they wrongly or deliberately furnished his office address for the purposes of policy. OP1 specifically pleaded that copies of policy were furnished to it and the complainant by the 2nd opposite party and the complainant did not dispute the same and on the other hand marked Ex.A1 policy copy. OP1 bank contended that whatever information was furnished by the complainant was forwarded to second OP insurance company for the purpose of issuance of the policy. There is no dependable evidence from the side of the complainant that he furnished the premises bearing no.40-30-3, Madum compound, Kurnool-40-30-DA3, Madum compound, Kurnool; 40-30-DA5, Madum compound, Kurnool; 44-16-5, Roja Prakash nagar of Kurnool town, Survey No.171/2(A)(1) of Mamidalapadu village and survey no.519/2 of Pullur village and that deliberately OP 1 mentioned Door No.354-62, Park road, Kurnool in the relevant papers. If there are any mistakes, in the policy in the said context the complainant ought to have brought to the notice of second opposite party for rectification but did not do so and the said inaction on his part is certainly fatal to his case as he was not vigilant. When there is no liability against insurance company the bank also cannot be made liable as it is only a facilitator which had limited role in forwarding the proposal forms duly signed by the complainant. Even assuming that by oversight in the proposal form the location of risk to be covered is mentioned as D.No.354-62, Park road, Kurnool, the complainant ought to have verified the proposal form when he signed to know whether the correct address was mentioned in it or not as he took the policy to claim insured amount in the event of damage his property. Since he slept over in the said context and blindly signed the proposal form he cannot point out the mistake on the part of OP1. It appears that to see that his valued client gets insured amount the bank made feeble attempt supporting the complainant in making correspondence with OP2 insurance company and, therefore, it is not helpful for the complainant. In such circumstances, even if the complainant submitted monthly stock statement of the stocks stored at different locations in and around Kurnool town and the bank officials inspected the locations periodically at the premises bearing No.40-30-3, Madum compound, Kurnool, etc., it is of no consequence in favour of the complainant. When the claims against both the OPs are not maintainable, there is no need to go into the details whether the claim is exorbitant or not. Thus, point no.2 is also decided against the complainant holding that OPs1 and 2 did not render any deficiency service to him.” 7. The learned counsel for the Appellants submitted that the first policy was taken by the Bank with the same Insurance Company in the year 2006-07 and it was a case of renewal. He drew our attention to the communication dated 08-05-2010 inter se written by the Chief General Manager, Canara Bank to the Assistant General Manager by which the Bank had clearly admitted that the proposal forms were submitted to the Insurance Company by mentioning the location of risk to be covered as office address of the borrower i.e. D.No.40-354-62, Park Road, Kurnool, instead of godown address where the stocks were stored. This mistake occurred only by oversight and not intentional. In good faith they have signed the proposal form filled by the insurance officials. He also drew our attention to another letter written by the Senior Manager, Canara Bank on 20-01-2011 to the Deputy General Manager, Canara Bank stating that the borrowers were submitted the monthly stock statements mentioning the addresses of the locations where the stocks were stored and the Bank was inspecting the same every month regularly and issuing the inspection reports. The borrower has also filed the lease agreements of these locations. The learned counsel vehemently contended that it is clear from this communication that the Bank was aware that the stock was stored in the subject locations and that due to oversight the office address of the Complainant was given instead of addresses of the respective godowns. He further argued that the Insurance Company never inspected the site before the issuance of the policy. He drew our attention to IA No.17599 of 2018 in FA No.555 of 2013 filed by the complainant seeking furnishing of the proposal form, in which, it is clearly stamped and signed by Canara Bank and not by the Complainant. 8. The learned counsel appearing for the Bank contended that in IA No.17599 of 2018 in FA No.555 of 2013, the proposal form was signed by the Complainant; that as per the terms & conditions of the agreement, it is the Complainant who has to take the Insurance Policy; that the Complainant was not vigilant in checking the address when he received the Insurance Policy; that the insurance officials filled the form and that there was no deficiency in service on behalf of the Bank. 9. The learned counsel appearing for the Insurance Company submitted that the repudiation is justified as the address given in the policy is different from the location where the actual incident occurred. On a pointed query as to whether any inspection was done prior to the issuance of the policy, it was submitted that it was the Bank which has forwarded the details and the Insurance Company had a Bank Assurance Agreement and the policy was issued based on the information received from the Bank. 10. The facts not in dispute are the issuance of the policy by the Insurance Company; the address mentioned in the policy as registered office address which is D.No.40-354-62, Park Road, Kurnool; the flash floods on 02-10-2009 and also the damage caused. The brief point that falls for consideration is whether the Insurance Company was justified in repudiating the claim made by the Complainant and if there was any negligence on behalf of the Bank in furnishing the address to the Insurance Company. For better understanding of the case, the inter se communication between the Bank dated 08-05-2010 is being reproduced as hereunder: “To The Assistant General Manager Canara Bank Circle Office
Narayanaguda Hyderabad Dear Sir, Sub: Flood Loss to the stocks of Eggs, Poultry Feed and Ingredients on 02-10-2009-A/c Sona Poultry Farm, Kurnool. With reference to the above, we would like to inform you that we have sanctioned OCC loan of Rs.30 lacs to M/s. Sona Poultry Farm in 2005 and have enhanced the loan to Rs.100 lacs in December, 2007. We have obtained an insurance policy from M/s. United India Insurance Co. Ltd., Kurnool covering the stocks for a sum insured of Rs.15,00,000/- on 26-12-2006. At the time of taking insurance coverage, we have submitted the proposal form to the insurance company with details. The above policy as renewed in 2007 and upon the enhancement of loan, we have taken insurance coverage for Rs.50 lacs in May, 2008. The above policy was again renewed on 26-11-2008 for one year with policy No.051100/11/08/11/0000971. Again on 09-04-2009, we have taken a fresh policy No.051100/11/08/11/00053 covering the stocks for Rs.50 lacs by submitting another proposal form to the insurance company. In this connection, the firm was maintaining godowns at different locations in Kurnool for storage of the stocks. We were also inspecting the godowns/locations periodically. The following are the locations inspected by us: D.No.40-30-3, Medum Compound, Park Road, Kurnool. D.No.40-30-A3, Medum Compound, Park Road,Kurnool. D.No.40-30-A5, Medum Compound, Park Road, Kurnool. D.No.44-16-J-5, Roza Prakash Nagar, Kurnool. Survey No.171/2A1, Mamidalapadu Village, Kurnool. Survey No.519/2, Pullur Village, Kurnool.
The borrower has an office at D. No.40-354-62, Park Road,Kurnool from 1998 onwards and the same was noted in our files for making correspondence. By oversight in the above two proposal forms submitted to the insurance company. The location of risk to be covered is mentioned as D. No.40-354-62, Park Road, Kurnool. Basing in the proposals, the Insurance Company has issued the policies mentioning the same address under the “locations of risks covered”. In the floods occurred on 01/02-10-2009, all the locations mentioned above were affected and the stocks stored therein were totally lost/damaged. We have preferred claims with insurance company. On 24-02-2010, the insurance company has closed our claim files stating that “the claim under the policy is not tenable considering change in risks locations from the policy”. On 10-03-2010, we have represented to the Insurance Company and requested them to reconsider and settle the claims keeping in view the Bank Assurance Agreement and MOU they entered with us. In this connection, we would like to inform you that prior to the Bank Assurance Agreement also; we were placing most of our insurance business with United India Insurance Co. Ltd. and obtaining insurance policies. After the agreement we are placing 100% business with them. Normally, whenever we require fresh insurance coverage, we inform the local insurance company and a representative will be deputed by them to coordinate with us for taking insurance coverage. We will discuss with them and handover the loan file to quote the premium. The insurance officials will fill up the proposal form and inform us the premium amount payable for the above. We will sign the proposal form and issue our pay order. For renewal of the policies, the insurance company will send us the renewal notices or an official deputed by them will approach our bank and will issue the pay order basing on the renewal notice. In the subject case, the proposal forms were completed by the insurance officials and was signed by us in good faith. While mentioning the location of risks to be covered in the proposal forms, the insurance officials mentioned the office address of the borrower i.e.40-354-62, Park Road, instead of godowns addresses where the stocks were stored. This mistake was happened only by oversight and not intentional. In good faith we have signed the proposal forms filled by the insurance officials. Now, the insurance company has closed our claims stating that the locations affected in floods are not covered in the policies. The borrower is one of our valued client and maintaining good account with us. The loss is genuine and they have suffered huge loss. The total stocks stored in the above six locations have been washed away/in floods, and they are put into great financial crisis. As per the borrowers statement the loss sustained by them is around Rs.126 lacs without getting insurance clam, it is very difficult to survive. In view of the facts mentioned above, we request you to take up the matter with United India Insurance Company, Head Office at Chennai for re-opening and re-considering the claims lodged by the borrower/Bank. We understand that the insurance company has considered the claims where there is a discrepancy with regard to single location of risk and the quantum of claim involved is less. We, also understand that the Head Office of United India Insurance Company has considered such type of claims all over India basing on the merits. We enclose herewith the copies of the letters addressed to the Insurance company by us/borrower for your ready reference. Thanking you, Yours sincerely, Chief Manager” (emphasis supplied) It is pertinent to note from the aforenoted letter that there is a clear cut admission on behalf of the Bank that by oversight in the two proposal forms submitted to the Insurance Company, the location of risk to be covered was mentioned as D.No.40-353-62, Park Road, Kurnool and that all the locations mentioned in the aforenoted letter were effected and the stocks stored were totally damaged. It is also admitted that they were having an agreement with the Insurance Company and were placing 100% business with them. It is evident that the policies were being renewed by the Insurance Company automatically by sending an official to the Bank and the Bank was issuing a pay order based on the renewal notice. Nowhere is it mentioned that the Insurance Company had ever done any inspection prior to the issuance of the policy or at the time of renewal. The contention of the Bank that the Complainant should have been vigilant with respect to the address mentioned in the policy is totally unsustainable in the light of the fact that it was the Bank which was signing the proposal form, issuing the pay orders and also admittedly handling the renewal of the policies and were in constant communication with the Insurance Company. Further, the agreement between the Bank and the Insurance Company with respect to 100% business being placed by the Bank with the Insurance Company also evidences that it was the Bank which was in direct contact with the Insurance Company and all policies were being routed through this Bank with the particular Insurance Company. 11. Additionally, it is also relevant to reproduce the letter dated 20-01-2011 written by the Senior Bank Manager to Deputy General Manager, Canara Bank, as hereunder. “To The Deputy General Manager Canara Bank Narayanaguda
Hyderabad Dear Sir, Sub: Flood loss to the stocks of Eggs, Poultry Feed and ingredients – Date of loss: 02-10-2009 – A/c Sona Poultry Farm, Kurnool. We refer to our letter No.MSCR/103/2010 dated 08-05-2010 on the above subject. In this connection, as already informed to you vide our above letter that we have sanctioned OCC loan of Rs.30 lakhs to M/s. Sona Poultry Farm in 2005 and have enhanced the loan to Rs.100 lakhs in December, 2007. We have taken insurance coverage to the stocks with M/s. United India Insurance Co. Ltd., Kurnool with effect from December, 2006. The said policy was renewed every year with the enhanced sum insured of Rs.50 lakhs. Upon the enhancement of loan, we have obtained another policy for the period 09-04-2009 to 08-04-2010 or an insured sum of Rs.50 Lakhs. Basing on the proposal forms submitted by us the insurance company has noted the location of risk in the policies. In the above two policies, by oversight, the address of the locations where the stocks were stored is mentioned by us in the proposal forms as “D. No.40-354-62, Park Road, Kurnool” instead of actual addresses of the locations where the stocks were stored. In this connection, we would like to bring to your kind notice that the borrower was having an office at D.No.40-354-62, Park Road, Kurnool from 1998 onwards and the same address was noted in our records for making correspondence. As per the information, the office was admeasuring 15’ X 12’ at the time of taking insurance coverage i.e. in 2006; the borrower was maintaining the following godowns, D.No.40-30-3, Medum Compound, Kurnool D.No.40-30-DA3, Medum Compound, Kurnool D.No.40-30-DAS, Medum Compound, Kurnool D. No.44-16-J-5, Roza, Prakash Nagar, Kurnool S.No.171/2A, Mamidalapadu (v), Kurnool S.No.519/2, Pullur (v), Kurnool
As per the Bank records and our monthly inspection reports, the borrower was having stocks at the above locations. The borrower was submitting monthly stock statements to us mentioning the address of the location where the stocks were stored/lying and we were also inspecting the same every month regularly and issuing inspection reports. The borrower has also submitted the lease agreement copies of the locations. In this connection, the borrower has vacated their office at D.No.40-354-62, Park Road, Kurnool in March,2008 and the building was demolished in May,2008 and construction of a new building was completed in July, 2009, and the new premises have been let out to other concerns. During this period, by oversight, we have taken a policy of Rs.50 lakhs mentioning the address of location in the proposal form as D.No.40-354-62, Park Road,Kurnool. Further, the office premises is too small and cannot hold the stocks of Rs.100 lakhs. The copies of the letter addressed by the landlord to the insurance company is enclosed for your perusal. The borrower has lodged claims with M/s. United India Insurance Co. Ltd. Kurnool for the damaged/lost stocks at the above locations. The insurance company has deputed the surveyors and arranged for survey/inspection. Now, the insurance company has closed claims stating that the locations affected in the floods are not covered in the insurance policies. By oversight we have mentioned the wrong address in the proposal forms at the time of taking insurance coverage in the year 2005/2006 and the same policies were renewing by us. This mistake occurred by oversight and was not intentional. The borrower has sustained heavy loss in the floods. The borrower is one of our valued clients and has been maintaining good account with us. In this connection, we also understand that the insurance company is considering the claims where there is a discrepancy with regard to single location of risk and where there is no change of location during the currency of the policy. In the subject policies, there is no change of location during the policy period. Further, we also understand that as per the Bank Assurance Agreement we entered into with M/s. United India Insurance Co. Ltd. and also as per the Bank clause, the insurance company is liable to pay the loss sustained by the insured. In view of the above facts, we request you to take up the matter with the General Manager – Fire Technical Dept., M/s United Insurance Co. Ltd., Head Office, Chennai who is the competent authority to rectify the policy and advise their Regional Office, Hyderabad for considering the claims. We enclose herewith the copies of correspondence exchanged with the insurance company by us/borrower for your perusal. Thanking you, Yours sincerely Senior Branch Manager” (emphasis supplied) 12. From the aforenoted emphasis it is all the more evident that as per the Bank records and monthly inspection reports, the Complainant’s stocks were being regularly inspected and inspection reports were being issued. It is also admitted that the Complainant had submitted the lease agreement copies of the locations. When the lease agreement copies were admittedly given to the Bank and the policy was issued through the Bank, the stand taken by the Bank that the Complainant should have been vigilant is untenable. 13. In the letter dated 10-03-2010, addressed by the Bank to the Divisional Manager, United India Insurance Company, it is clearly stated as follows: “The insured was submitting stock statements to the Bank regularly stating the quantity of stocks and the value in the above locations. We were also inspecting the above locations and verifying the stocks regularly. By oversight, while taking insurance coverage, it was noted in the policy as D.No.40-354-62, Park Road, Kurnool, which was the insured’s office address instead of the above locations where the insured was storing the stocks in their godowns.” Even in this letter, it was clearly stated, that by oversight, while taking insurance coverage, the address that was mentioned in the policy was the office address and not the godown address. It is not the case of both the Opposite Parties that the Complainant had shifted his address or that the address given in the policy was not that of the Complainant. It is evident from the material on record that the address given is the office address and, inadvertently, it is the Bank which has forwarded the proposal form with the office address and not the addresses of the locations where the stocks were kept. Further, the Bank Assurance Agreement entered into between the Bank and the Insurance Company facilitates that the Bank takes insurance policies for their clients who have taken loans only with this particular Insurance Company. Therefore, now the Bank cannot fasten the liability on the Complainant stating that the Complainant did not inform them about the addresses of the godowns and had forwarded only the information furnished by the Complainant to the Insurance Company. This stand taken by the Bank is totally untenable as admittedly they have been inspecting the stock at the respective premises and the Bank officials were also signing the stock statements. 14. At the cost of repetition, we reiterate that the act of the Insurance Company in issuing the policy at the office address and not inspecting the location even once, prior to the issuance of the policy, and also repeatedly renewing them at the very same office address, amounts to deficiency in service and is also contrary to the regulations laid down by the IRDA, specially in the light of the fact that the policies were meant to cover the risk of stocks which are obviously kept at the godowns and not at the office premises. Therefore, for all the aforenoted reasons, we are of the considered view that the repudiation made by the Insurance Company on the ground that office address was given and not the godown address in the policy is totally unjustified and the Bank is also held deficient for not having informed the Insurance Company about their right address where the stocks were kept as it was the Bank which was deducting the premium from the loan account and was in direct contact with the insurance personnel regarding renewals. 15. Now, we address ourselves to the quantum of loss/damages that need to be awarded. 16. A brief perusal of the survey report dated 04-07-2011 stating that ‘it appears that the Bank has evidently continued to declare wrong risk locations in the policy’. The Survey Report has clearly enumerated the entire stock statements with the date of inspection and the names of the officials who have done the inspection along with the respective values which further evidences that the stock was present in the locations which were inundated. The Surveyor has assessed the loss after deducting the policy excess at Rs.89,49,999/-, though the Complainant had claimed a loss of Rs.1,26,16,535/-. A perusal of the Survey Report evidences that the Surveyor had gone into great detail and rightly assessed the loss at Rs.89,49,999/-. We are of the opinion that both, the Bank and the Insurance Company, are deficient in their services and for all the aforenoted reasons, these Appeals are allowed and the order of the State Commission is set aside. Both, the Bank and the Insurance Company, are jointly and severally held liable to pay to the Complainant the cumulative amount of all the three claims, i.e., Rs.89,49,999/- with interest @9% p.a. from the date of repudiation till the date of realization; together with costs of Rs.25,000/-, within four weeks from the date of receipt of copy of this order failing which the amount shall attract an interest @12% p.a. for the same period. The Appeals stand disposed of with the aforenoted observations. |
