1.       The present Complaint is filed under Section 21(a) (i) of the Consumer Protection Act, 1986.

2.       The Complainant, herein, is a Welfare Society duly registered under the Society’s Registration Act, 1860, vide Certificate of Registration dated 18.06.2008. It has an Institute under the name of M/s Amar Jyoti Institute of Management Sciences at Village Maycha, Greater Noida, Gautam Budh Nagar, Uttar Pradesh – 201 301. The Complainant obtained a Standard Fire & Special Perils (Material Damage) Policy from the Opposite Party Insurance Company, bearing No. 41269-0000-00, for the period 22.09.2011 to 21.09.2012 for a total sum insured Rs.4,00,00,000/-, Rs.3 crores towards building and Rs.1 crore towards furniture, fixtures and fittings. The Complainant paid Rs.18,495/- as premium for the said Policy to the Opposite Party. The Complainant also took additional cover for earthquake (fire and shock) for a sum assured of Rs.4 crore.

3.       The case of the Complainant is that during the subsistence of the Policy on 05.03.2012, an earthquake measuring 5.2 on Richter Scale occurred resulting in damage of Block B of the Institute Building of the Complainant. The insured Complainant immediately informed about the damage to the Opposite Party, vide e-mail dated 05.03.2012 and supplied the requisite documents for processing the claim. The Complainant also got the damage inspected by an Architect. According to his report dated 10.03.2012, the cracks/openings at the corners extending in the diagonal direction was a clear indication of seismic failure of the building structure. The Opposite Party, on receipt of the claim, appointed a Surveyor who inspected and gave his report dated 14.03.2012 to the Complainant. The Complainant, in response to the findings of the Surveyor, sent a detailed reply dated 24.03.2012 to the Opposite Party along with a claim of Rs.263.41 lacs. The Opposite Party, vide letter dated 28.08.2012, repudiated the claim of the Complainant on the ground that the cracks were “visibly aged” and were due to ground settlement. Aggrieved by the repudiation of the claim, the Complainant filed the present Complaint with following prayer:-

“i) direct the Opposite Party to pay to the complainant an amount of Rs.2,63,41,000/- towards damages to the insured structure;

ii) direct the Opposite Party to pay an amount of Rs.10,00,000/- towards the mental torture and harassment, etc.;

iii) direct the Opposite Party to pay to the complainant Rs.5,00,000/- as costs of litigation;

iv) direct the Opposite Party to pay interest at the rate of 24% upon the above said amount

and/or

v) pass such other order or orders as this Hon’ble Commission may deem fit and proper in the facts and circumstances of the case.”                     

4.       The Opposite Parties resisted the Complaint by filing a Reply wherein it was stated that the Complaint was not maintainable under the Consumer Protection Act, 1986 as the Complainant failed to satisfy that they were ‘Consumer’ within the meaning of Section 2 (1)(d) of the Act. The Complainant wearing the mask of ‘Welfare Society’ filed the Consumer Complaint instead of a Civil Suit. The Opposite Party relied on a judgement of this Commission “Bombay Dyeing & Manufacturing Co. Ltd. v. Union Bank of India.” It was further stated that the Standard Fire & Special Perils (Material Damage) Policy Schedule dated 30.09.2011 unequivocally stated that the Insurance Cover for earthquake was not absolute but subject to additional conditions and attached clauses/ endorsements/ warranties as per the Policy wordings. The Opposite Party stated that the Policy Schedule should not be read in isolation but in conjunction with all the terms, conditions, clauses, endorsements and warranties as applicable in the Policy.  The Opposite Party denied that the premises was inspected/ surveyed by their Panel Investigator/Surveyor prior to issuance of the Policy. It was also denied by the Opposite Party that earthquake measuring 5.2 on the Richter Scale had occurred. The Final Report by the Surveyor dated 30.08.2012 indicated in Para 5 “that the Modifed Mercalli Scale (MMI) for this Earthquake was VI, which is unlikely to cause the damage of such nature”. The Opposite Party also employed a well reputed and respected Geotechnical Consultant, M/s Nagadi Consultants Private Limited to conduct geotechnical investigation of the ground soil. The said agency conducted an investigation and submitted its report dated 19.06.2012 which reads as follows:-

“1. The cracks appeared soon after the construction had been completed as indicated by the client’s representative.

2. Cracks have been primarily observed at the junctions of the walls with the RCC structural elements (i.e. beams and columns made of reinforced cement concrete) of the building.

3. Cracks have also appeared at the junctions of the walls and flooring which are apparently due to the sinking of the flooring.

4. The width of the cracks have increased over a period of time.

5. Cracks have not been observed in the RCC structural elements.”

5.       The Surveyor observed that the cracks in the concerned building have not appeared because of the Earthquake at all. It is seen from the Survey report, vide Para 9 under the head “Assessment of Loss”,  that the Insured initially provided an estimate of loss worth Rs.263.41 lacs, and after multiple round of discussions, the Insured re-submitted revised claim of Rs.63,80,709/-. The Survey Report, after detailed analysis and calculation assessed the net loss as Rs.25,87,917/- caused by a peril not covered under the subject Insurance Policy. The Opposite Party submitted that the repudiation was just, fair and correct taking into account all aspects of the claim read with the Policy conditions and Surveyor’s Report. 

6.       Heard the Learned Counsel for both the Parties and carefully perused the record. Learned Counsel for Complainant submitted that the Opposite Party failed to observe that the entire building, including Block A and Block B were completely recent constructions of A category. It was submitted that due to damage in Block B, the Complainant made a make-shift arrangement and conducted classes in the administrative Block A to avoid loss to the students. Moreover, the entire building and furniture had been inspected by AICTE Team as well as the Insurance Company and Bank for grant of AICTE approval, Insurance Policy and for valuation of building for grant of loan respectively. The Complainants had also annexed a report demonstrating the impact of earthquake damage in masonry wall low rise house which states as follows:-

• Separation of walls at corners and T intersections
• Diagonal cracks starting at wall openings
• Out-of-plane partial or complete collapse of walls
• Diagonal and X type of cracks
• Cracking between walls and roof/floor
• Diagonal cracks between wall opening

7.       Learned Counsel further submitted that the damage suffered by Block B of the Institute of the Complainant fell under one of the above damage according to the aforementioned report. The Surveyor wrongly observed that cracks had appeared at the junctions of the walls and floorings due to sinking of flooring and increased over a period of time. This observation of the Surveyor was erroneous for the reason that the Policy was issued on 30.09.2011, after due inspection of the building by the agents of the Opposite Party and the claim had been made only after 5 months from the date of issuance of the Policy. The cracks in the building, therefore, could not be old. Further, the Complainant also got the premises inspected by a Senior Consultant (Science), Shri V.N. Sehgal who vide his report dated 14.09.2013 observed that Earthquake of 5 Richter Scale magnitude falls under VI to VII Mercalli Intensity which can result in slight damage. If the buildings are poorly built, then it can also lead to severe damage.

8.       On the issue of maintainability, the Learned Counsel for the Opposite Party submitted that the Complainant had inflated the claim to satisfy the pecuniary jurisdiction of this Commission. It was also submitted by the Opposite Party that the matter required detailed examination of technical nature involved in the claim, which was not appropriate for Summary Trial under the Consumer Protection Act, and should be relegated to a Civil Court.

9.       On merits, the Counsel for Opposite Party argued that the repudiation of the claim was made after due consideration of all aspects of the claim read with the insurance policy, terms, conditions and exclusions and the independent Surveyor's report dated 30-8-2012, which was based on an acknowledged Expert's Report and soil testing. Also, the Parties are governed by the contract of Insurance, subject to its terms, conditions and exclusions, and that a contract of Insurance has to be construed strictly without any extra-liberalism in construction of the contractual terms and conditions. The Opposite Party relied on Clause VIII Subsidence and Landslide including Rock slide, General Exclusions (9), General Conditions (6) & (9) of the Policy and Earthquake Clause-Special Condition Clause. It was submitted that the reliance placed by the Complainant on its chosen expert Shri. V. N. Sehgal is unsustainable, as it is based on vague generalizations, inherent contradictions, and random select extracts, which would be of mere academic interest. Further, the report has been procured one year after the repudiation of the claim based on the detailed independent Surveyor's report.   

10.     Facts of the case are that the Complainant took Standard Fire & Special Perils Policy to insure the building of the Institute bearing Policy No.41269-0000-00 dated 30.09.2011 covering the risk for the period 22.09.2011 to 21.09.2012. The Complainant had taken an additional cover for Earthquake (fire and shock). On 05.03.2012 at around 1:11 pm, an Earthquake measuring around 5 magnitude was reported in Delhi and surrounding areas. As a result, some part of the Building of the Complainant situated in Village Maycha, Greater Noida was damaged. The Complainant immediately informed the Opposite Party with respect to the incident and damaged caused to the premises due to the same, vide email dated 05.03.2012. The Opposite Party appointed Protocol Surveyors & Engineers Private Limited to prepare Survey Report and assess the loss. The site was visited by the Surveyor on 10.03.2012 and on 12.03.2012. During his visit, he observed the status of building and came to conclusion that the cracks had gradually developed due to ground settlement. The damage constituted cracks in the Brickwork & Plaster/ Paint, and Settlement of Flooring. The Surveyor, in his final report dated 14.03.2012, assessed the net cost of damage as Rs.25,87,917/- caused by a peril which is not covered under the subject Insurance Policy. The Opposite Party on the basis of the final Report of the Surveyor repudiated the claim of Complainant, vide letter dated 28.08.2012.

11.     Regarding the preliminary issue of maintainability of the Complaint, we find that no complicated facts are involved as alleged by the Opposite Party. This Commission is very well within its jurisdiction to decide the present Consumer Complaint. This Commission in Harsolia Motors v National Insurance Company Ltd. [I (2005) CPJ 26 (NC)] held that a contract of Insurance is a contract of indemnity and, therefore, there is no question of commercial purpose in obtaining insurance coverage. In view of law laid down, the Complainant is a “Consumer” and the Complaint is maintainable. The judgment relied by the Opposite Party in Bombay Dyeing (supra) is not applicable as in the said judgment the issue related to commercial transaction between the Bank and a Company. In the instant case the dispute relates to the Insurance, which is a contract of indemnity. The Complaint is, therefore, maintainable before this Commission.

12.     On merits, the Standard Fire & Special Perils Policy purchased by the Complainant included Earthquake (Fire & Shock) Clause in following terms:-

“In consideration of the payment by the Insured to the Company of the sum of As Agreed additional premium, it is hereby agreed and declared that notwithstanding anything stated in the printed exclusions of this Policy to the contrary, this Insurance is extended to cover loss or damage (including loss or damage by fire) to any of the property Insured by this Policy occasioned by or through or in consequence of earthquake including flood or overflow of the sea, lakes, reservoirs, and rivers and/or Landslide/ Rockslide resulting there from

Provided always that all the conditions of this Policy shall apply (except in so far as they may be hereby expressly varied) and that any reference therein to loss or damage by fire shall be deemed to apply also to loss or damage directly caused by any of the perils which this Insurance extends to include by virtue of this endorsement”

13.     The building of the Complainant developed cracks near the beams on the wall due to the Earthquake, on 05.03.2012, which was duly communicated to the Opposite Party. The Complainant also submitted the report of the Architect and Senior Consultant (Science), Shri V.N. Sehgal which showed that the damage was due to seismic failure of the building structure. The Opposite Party alleged that the cracks developed on the walls of the RCC building was a result of ground settlement. It is relevant to mention that the Policy was issued on 22.09.2011 and the incident of earthquake occurred on 05.03.2012 i.e. after six months of the date of the Policy. At the time of filing the claim they cannot be permitted to take the stand that damage to the building was due to gradual settlement of earth and not due to the earthquake. This is a case based on the doctrine of res ipsa loquitur (thing speaks for itself). The case of the Complainant is also supported by the report of the Architect and Senior Consultant (Science). Opposite Party had not stated that the said report of Shri V.N. Sehgal was not correct or the report was arbitrary. It is also not the case of the Opposite Party that the cracks in the building were already there before the date of incident. The Opposite Party arbitrarily repudiated the claim of the Complainant citing Ground Settlement as the reason. Coming to assessment of loss, the Complainant had claimed an amount of Rs.63,80,709/-. The Surveyor had examined the matter in detail and recorded that aluminium doors & windows, electrification & sewerage/plumbing were not considered as they were not damaged.  The rates of vitrified tile flooring were found higher than the market rates. Amount of Rs.5,75,844/- was deducted as under Insurance. The Surveyor assessed the net loss at Rs.25,87,917/-.

14.     In view of aforesaid discussions, the Complaint is partly allowed. We direct the Opposite Party Insurance Company to pay Rs.25,87,917/- with an interest at the rate of 9% p.a. from the date of repudiation till its realization. The order be complied within eight weeks failing which the Complainant shall be entitled to an interest of 12% p.a. from the date of default till realization.