PER MR SUBHASH CHANDRA, MEMBER

1.      This complaint under section 21 of the Consumer Protection Act, 1986 (in short, the ‘Act’) has been filed seeking the enhancement of claim filed with the opposite party with compensation alleging deficiency in service.

2.     The complainant is a registered company engaged in wind energy generation through windmills which are insured with the opposite party under a Standard Fire and Special Perils Policy on “re-instatement value (RIV) basis”. The facts of the case, as stated by the complainant, are that during the renewed period of the policy from 16.02.2010 to 15.02.2011, on 11.10.2010, a fire accident damaged windmill no. 1 bearing serial no. 1010 connected to HTSC 34 situated on survey no. 526/4, Aralvoimozhi village, Muppandal, Thovalai Taluk 629301. This windmill was erected and commissioned on 30.09.1993 and was insured for Rs 1,07,55,000/- and premium was being paid on reinstatement value basis. It is stated by the complainant that though the policy document did not initially mention that the policy was on reinstatement value basis, subsequently an endorsement based on the insured’s request dated 16.02.2010 recorded that “Notwithstanding anything stated to the contrary it is hereby declared and agreed that the policy is subject to reinstatement value clause as from inception of the policy and not as otherwise stated therein”.  The complainant states that despite this endorsement and the law laid down by the Hon’ble Supreme Court in CIT Vs. Kasturi & Sons Ltd (1999) 3 SCC 346 that once the insurer elects to reinstate, the insurance policy shall be deemed to have been one for reinstatement from inception, the fire claim filed by the complainant was settled by the opposite party on depreciation value basis for Rs 11,36,993/-. It is contended that as the value for which the windmill was insured was Rs 1,07,55,000/-, after deducting salvage value of Rs 90,000/- the claim was submitted for Rs 1,06,65,000/-. Having intimated the opposite party about the fire and provided details to the surveyor appointed by the opposite party, on the basis of the surveyor’s advice dated 27.10.2010 the gear box and generator was sent to Apollo Electric Service and M/s RS Windtech Engineers (P) Ltd respectively to assess the possibility of repairs. Due to the extensive damage, repairs were not found feasible by these agencies. The complainant therefore ordered installation of a new windmill by M/s Chiranjeewi Wind Energy Ltd. which was reported to have been done on 30.09.2011. Accordingly, the same was conveyed to the opposite party vide letter dated 01.10.2011 by the complainant. The cost incurred was Rs 1,13,41,200/-, inclusive of cost of new windmill (Rs 1,07,75,000/-), installation cost of Rs 4,41,200/- and associated costs of Rs 1,25,000/- and therefore a revised claim bill for Rs 1,14,33,367/- which included the cost of dismantling the insured windmill was submitted to the opposite party vide letter dated 16.02.2012.

3.      The complainant states that despite providing all information and documents, the opposite party on 12.12.2012 sent a loss voucher for full and final settlement for Rs 11,36,993/- without assigning reasons. A legal notice was sent on 21.01.2013 to the opposite party which was replied on 09.05.2013 stating that the reinstatement value clause had only prospective application and that the loss had been settled on 80% depreciation basis. The complainant has alleged deficiency in service on the ground of prospective applicability of the reinstatement value clause and contended that the effect of the endorsement was an unequivocal exercise of option by the opposite party of providing reinstatement value. The complainant has approached this Commission with the following prayer:

a.       direct the Opposite Party to pay an amount of Rs.1,14,33,367/- towards reinstatement value under the insurance policy;

b.       in the alternative and without prejudice to the above relief claimed in light of the fact that the entire windmill was destroyed in the fire, pay Rs 1,07,55,000/- to the Complainant, being the value and sum for which the windmill was insured for under the insurance policy;

c.       direct payment of interest at the rate of 18% from the date of the claim till full payment; and

d.       pass such further or other orders as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.

4.      The complaint was resisted by the opposite party by way of a written version. It was contended that the complaint was frivolous and mala fide and that the complainant, being a commercial organization engaged in business for profit, was not a ‘consumer’ within the meaning of section 2 (1) (d) of the Act. It is denied that there was any deficiency in service on part of the respondent insurance company. It is stated that the complainant, vide letter dated 11.10.2010 had intimated that the windmill in question had caught fire the same day and the estimate for replacement was approximately Rs 60,00,000/-. The respondent had appointed M/s Asawa and Co., Surveyors and Loss Assessors, Coimbatore to conduct the survey and assess the loss. The surveyor’s report dated 14.06.2011 assessed the net loss on market value basis at Rs 11,37,400/- observing that the windmill had been in service for more than 17 years and the surveyors applied 80% depreciation while assessing the loss. The surveyors also assessed loss on reinstatement value basis at Rs 65,50,086/-. The surveyors report noted that in the meantime the insurers had informed them, vide letter dated 26.05.2011, that an endorsement had been issued by them in respect of inclusion of reinstatement value clause which was not there in the policy. This endorsement, according to the respondent, was passed after 7 months from the date of loss. Since normally endorsements cannot be issued once the loss has been reported and a claim preferred by the insured, the surveyors observed that the prerequisite for settlement of claim on RIV basis of reinstating the damaged property and its re-inspection by the surveyors along with inspection of bills, invoices and proof of payment was not met. The surveyor’s report stated that the insured had neither repaired the machine nor replaced it till date. Therefore, the claim was examined by the Competent Authority of the opposite party and it was discovered that the RIV clause was obtained by the insured from the DO, Nagercoil seven months after the occurrence of the peril. The claim was accordingly considered under the Standard Fire and Special Perils policy without RIV on market value basis and was approved for Rs 11,36,993/- which was offered as full and final settlement to the complainant. The same was, however, declined by the complainant. It is the respondent’s case that the claim has been considered on the basis of the surveyor’s report and that it is settled law that a policy of insurance is a contract which is required to be considered in accordance with the terms and conditions of the policy. Reliance is placed on the Hon’ble Supreme Court’s judgments in Vikram Green Tech India Ltd Vs. New India Assurance Co. Ltd. (2009) 5 SCC 599 and Suraj Mal Ram Nivas Oil Mills Pvt. Ltd. Vs. United India Insurance Co. Ltd. (2010) 10 SCC 567. It is also contended that as the policy provides for arbitration under clause 13 which has not been utilized by the complainant, the complaint be dismissed.

5.      We have heard the learned counsel for both the parties and carefully considered the material on record, including the rejoinder and written statement.

6.      From the record, it is evident that there is no dispute with regard to fact that the damage to the windmill insured was on account of accidental fire. The issue is the value of the loss allowed by the opposite party. It is not disputed that the policy covering the windmill in question had, at the request of the complainant, been issued with an endorsement by the opposite party stating that the policy was on reinstatement value basis and that this policy was to be considered on this basis since inception. The complainant’s case is that in view of this endorsement the claim for loss under the policy should have been considered on reinstatement basis and not on the basis of depreciation of market value as has been done by the opposite party. However, the respondent contends that this endorsement was issued after 7 months of the reported loss which is contrary to the standard practice of the insurer. For this reason the opposite party has accepted its surveyor’s recommendation to assess the loss on depreciation of market value basis and not RIV basis. Accordingly the loss is assessed as below:

        Replacement value of windmill as on date of loss    :  Rs   1,14,75,000

          Less 80% depreciation                                         :  Rs      91,80,000

          Market value of the windmill                                  :  Rs      22,95,000

          Less: Salvage                                                        :  Rs      11,47,500

          Net loss assessed                                               :  Rs      11,47,500

7.      The complainant’s case, on the other hand, is based upon the endorsement issued by the opposite party on the policy on the basis of which he has claimed to be compensated on RIV basis. It is stated that the necessary documents for the reinstatement of the windmill had been provided by him vide letter dated 01.10.2011 to the opposite party. The total cost incurred on reinstatement was Rs 1,13,41,200/- which comprised of the cost of the new windmill of Rs 1,07,75,000/-, installation cost of Rs 4,41,200/- and associated costs of Rs 1,25,000/- totaling to Rs 1,14,33,367/- including cost of dismantling the insured windmill. 

8.      The moot issue is whether the opposite party was justified in rejecting the endorsement it had issued on the policy incorporating the reinstatement value basis. It is significant that the opposite party had conveyed to the surveyor vide letter dated 26.05.2011 that an endorsement had been issued. It has thereafter taken the view that since it was issued by the DO, Nagercoil and was issued seven months after the incident of the peril, this endorsement was not applicable to the claim. It has therefore acted on the recommendation of the surveyor to settle the loss claim on market value depreciation basis applying 80% depreciation.

9.     The opposite party has not denied that the endorsement dated 26.05.2011 was issued by it. It has not brought on record any document to indicate that an endorsement issued after the incident was to apply only prospectively. It has also not disputed that the complainant provided details of reinstatement along with invoices/bills of procurement of the new windmill, its erection and commissioning apart from the dismantling of the old windmill. When the opposite party does not dispute the endorsement nor produces any evidence that supports its argument that the effect of the endorsement shall be prospective, it is not open for it to reject a claim based upon its own endorsement that clearly states that

“Notwithstanding anything stated to the contrary it is hereby declared and agreed that the policy is subject to reinstatement value clause as from inception of the policy and not as otherwise stated therein”.

(Emphasis added).

From the record it is evident that the surveyor’s report is dated 14.06.2011. The dismantling of the damaged wind mill in question was completed as per records provided by the complainant on 30.09.2011 and was reported by the complainant to the respondent vide letter dated 01.10.2011. While the surveyor in his report submitted earlier may have ignored this, the respondent should have considered it before issuing the loss voucher dated 12.12.2011. The opposite party appears to have acted blindly on the basis of the surveyor’s report. It is relevant to note that the Hon’ble Supreme Court in Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd. & Anr. in CA No. 4487 of 2004 dated 24.08.2009 (2009) 8 SCC 507, has laid down that “the insurer was not prohibited from appointing another surveyor for fresh estimation of loss since non consideration of material facts that ought to have been taken into consideration can be a ground for the conduct of a fresh survey and that this Commission can intervene since rejection is arbitrary and not based on acceptable reasons”. However, it has also laid down in New India Assurance Co. Ltd. Vs. Pradeep Kumar (2009) 7 SCC 787 that a surveyor’s report is not sacrosanct that cannot be departed from. In view of the foregoing, the complaint is found to have merit and is liable to succeed. The complainant is found entitled to settlement of the loss incurred as per the re-instatement value basis, inclusive of dismantling of the old windmill and the procurement, erection and installation of the new windmill.    

10.    The complaint is accordingly allowed. The opposite party is directed to pay the complainant a sum of Rs 1,14,33,367/- for the loss of windmill on re-instatement basis. Opposite party shall also pay the complaint interest at 6% per annum from the date of claim till realization. This order shall be complied with within 8 weeks failing which interest shall be paid at 9% per annum. No order as to costs. The consumer complaint stands disposed of with these directions.